Those working in the informal sector struggle the most during lockdowns as they are in a blindspot in official government statistics.
PETALING JAYA: Workers in the informal sector will continue to be the hardest hit by the repeated lockdowns and movement control orders (MCO) in the country, especially in urban areas.
Two academics weighed in on this subject with one suggesting that workers in the informal sector might be crippled financially following the government’s efforts in trying to control the spread of Covid-19.
The other estimated that 100,000-200,000 such workers in the Klang Valley might fall into urban poverty as a result.
The labour department stipulates that a person is a worker in the informal sector if their enterprise is not registered with the Companies Commission of Malaysia (CCM) or any other professional bodies, including the local authorities.
Binary University’s vice-chancellor and economist Sulochana Nair said the consequences of any form of the MCO would not only affect informal workers, particularly the self-employed, but also those in the B40 who depend on this sector for cheaper goods and services.
Nair, who also specialises on poverty research, said those working jobs in informal sectors tend to struggle the most during lockdowns and movement restrictions due to them being a blindspot in official government statistics.
“As a result, they are excluded from the billion-ringgit economic stimulus packages as well,” she said.
The Labour Force Survey conducted in the first quarter of 2020 established that about 2.66 million people were self-employed. That is 17.4% of the total workforce in Malaysia.
The number includes small-time stall-owners, hawkers and even mobile vendors selling goods and services.
Workers in the informal sector, whether self-employed or otherwise, are also not covered by any social security. They generally do not have formal working contracts.
Nair said it was also true that many people who have proper jobs in large cities also had informal jobs to supplement their incomes.
“These individuals would be just as affected by the rise in the number of Covid-19 cases.
“A lot of formal workers from the urban poor in the Klang Valley depend on this sector, because they are likely to be working at low-income jobs. The supplementary income from their work in the informal sector helps them to make ends meet,” she said.
Niaz Asadullah, a professor at the Faculty of Economics at Universiti Malaya said the lockdowns and MCO could see 100,000 to 200,000 workers fall into urban poverty, of which half were workers in the informal sector.
“This group were the most vulnerable to hardcore poverty. Aside from being left out of the existing social protection schemes (such as Socso), they generally also have little savings and productive assets.
“Although latest official data is unavailable, given the severe blow to their livelihoods, income for the majority in this category today would be well below the new national poverty line of RM2,208 per month per household,” he told FMT.
He added that even though the sector does not largely contribute to the country’s GDP, it plays a significant role in providing jobs, with one in every five people in the Klang Valley relying on the informal economy.
Niaz called for the government to allow some flexibility with loan moratoriums for them.
“The poor are particularly vulnerable to bad debts and defaults as they lack financial literacy and money management skills.
“So, alongside offering loan moratoriums, the government would have to proactively engage in social messaging promoting fiscal discipline and discouraging wasteful expenses.
“Household debt in Malaysia is already very high, 87% of the country’s GDP. A healthy credit culture is necessary for post-pandemic financial and economic recovery.”