“How Global Recession Affects Informal Sector Workers, Especially Women”

When the global economy trembles, the shockwaves don’t reach everyone equally. Picture a street vendor in Mumbai who sells flowers every morning, or a domestic worker in Nairobi who supports her family through cleaning homes. These women, working outside the boundaries of formal employment, often find themselves on the frontlines when economic storms hit. During a global recession, while headlines focus on stock markets and corporate layoffs, millions of informal sector workers-particularly women-face a quieter but devastating crisis that threatens their very survival.

How economic downturns devastate informal livelihoods 🔗

The informal economy encompasses all those who work without legal protections, social benefits, or job security-from agricultural laborers and construction workers to street vendors and home-based artisans. Globally, 58 per cent of employed women work in informal employment, making them particularly vulnerable when economic crises strike.

There’s a common misconception that the informal sector acts as a safety cushion during recessions, absorbing workers who lose formal jobs. The reality tells a different story. Research from South Africa during the 2008 financial crisis revealed that the informal sector contracted by about 4 per cent during the crisis period, experiencing shocks similar to or worse than the formal economy. Rather than providing refuge, informal employment proved equally susceptible to economic turbulence.

When recession hits, informal workers face multiple threats simultaneously. Demand for their goods and services plummets as customers reduce spending. Price fluctuations make raw materials more expensive while forcing them to lower their selling prices to compete. Many informal businesses operate on razor-thin margins, meaning even small disruptions can push families into hunger. During the early months of the COVID-19 pandemic, informal workers globally lost an average of 60 per cent of their income in just the first month.

The myth of the informal safety net 🔗

The assumption that displaced formal workers can easily shift to informal self-employment doesn’t account for the realities of informal work. Starting even a small vending business requires capital for inventory, knowledge of supply chains, established customer relationships, and often, physical space or permits. During economic downturns, these barriers become higher, not lower. Competition intensifies as more people chase fewer opportunities, and access to credit becomes scarce just when it’s needed most.

Why women bear the heaviest burden 🔗

Women’s concentration in the most precarious forms of informal work makes them especially vulnerable during recessions. They dominate sectors like domestic work, street vending, and home-based production-areas that offer the least protection and the greatest vulnerability. In South Asia, over 80 per cent of women in non-agricultural jobs are in informal employment, working without labor law protections, pensions, health insurance, or paid sick leave.

The gender dimension of economic crises runs deeper than employment statistics. Women face a triple burden: they earn less than men even in good times, they shoulder disproportionate unpaid care responsibilities, and they have fewer savings to fall back on during emergencies. When schools close or family members fall ill during a crisis, women typically sacrifice their income-earning activities to provide care, while men are more likely to maintain their economic activities.

During the 2008 financial crisis in South Africa, women in informal self-employment experienced dramatically different outcomes than men. The share of women in informal self-employment dropped sharply, with a 15 per cent decrease in informal sector employment compared to just 4 per cent in formal employment. Most of this decline occurred among women in wholesale and retail sectors in urban informal and rural areas-the very communities where women depend most heavily on informal trade.

The hidden costs of crisis 🔗

For women like Ana Paula Soares, a 27-year-old domestic worker in Timor-Leste, the COVID-19 recession meant losing her income overnight with no unemployment benefits, no savings buffer, and no alternative options. Across the world, 72 per cent of domestic workers lost their jobs during the pandemic, many without receiving their final wages or any notice period.

The economic insecurity women face during recessions extends beyond immediate income loss. Reduced earnings force difficult choices-pulling daughters out of school, skipping meals, delaying medical care. These decisions have cascading effects that persist long after the recession ends, trapping families in poverty cycles that span generations.

Building resilience through strategic interventions 🔗

Weathering economic storms requires a multifaceted approach that addresses both immediate vulnerabilities and long-term structural inequalities. The good news is that targeted interventions can make a real difference in helping informal sector workers, especially women, build resilience against economic shocks.

Expanding social protection systems 🔗

The most critical intervention is extending social protection to informal workers. The COVID-19 crisis exposed the vulnerabilities of workers in the informal economy who lack adequate social protection coverage, with many facing existential struggles without income security or access to healthcare.

Progressive social protection systems should include several components: cash transfers or unemployment compensation during crises, subsidized or deferred tax payments, access to affordable healthcare regardless of employment status, and pension schemes adapted to informal work patterns. Countries that implemented emergency cash transfers during COVID-19 provided critical lifelines, though many measures were temporary and insufficient to meet actual needs.

Skills development and training 🔗

Equipping women with diverse, marketable skills increases their ability to navigate economic uncertainty. Effective skills training programs for women must address specific barriers, including scheduling sessions around family responsibilities, providing training in accessible locations, offering instruction at appropriate literacy levels, and including modest fees or scholarships to ensure commitment while maintaining accessibility.

Digital literacy represents a particularly valuable skill set in today’s economy. Training women in mobile-based business tools-like using simple apps to track sales, analyze customer patterns, and forecast seasonal demand-can transform intuitive business practices into data-driven decisions. These skills not only improve daily operations but also help women document their businesses, making it easier to access formal credit and build assets.

Policy reforms that matter 🔗

Creating an enabling environment for informal workers requires comprehensive policy reforms. Governments should recognize informal workers’ fundamental rights, simplify business registration processes, provide access to affordable credit through microfinance and cooperative banking, invest in basic infrastructure like markets, water, and sanitation, and design gender-responsive labor policies that acknowledge unpaid care work.

Legal recognition matters enormously. When informal workers gain official status-even without full formalization-they can access services, negotiate for better conditions, and organize collectively. India’s National Street Vendors Act, for example, has helped thousands of vendors secure legal recognition and protection from arbitrary evictions.

Supporting collective action 🔗

Women’s organizations and informal worker cooperatives play crucial roles during economic crises. These groups provide networks for sharing resources, collective bargaining power, access to information about available support, and platforms for political advocacy. During COVID-19 lockdowns, domestic workers’ associations across Latin America organized community kitchens, raised funds door-to-door, and brought relief to the poorest neighborhoods when government support fell short.

Strengthening these organizations-through capacity building, legal support, and funding-multiplies their impact. When informal workers organize, they transform from invisible individuals into collective actors who can demand policy attention and shape economic recovery efforts.

What do you think? How can governments better balance immediate crisis response with long-term systemic changes that protect informal workers? What role should the private sector play in supporting women who are their informal workforce suppliers yet lack basic protections?

References

1. https://www.unwomen.org/en/news/stories/2020/9/feature-covid-19-economic-impacts-on-women
2. https://www.wiego.org/blog/informal-employment-and-global-financial-crisis-middle-income-country/
3. https://www.unwomen.org/en/news/in-focus/csw61/women-in-informal-economy
4. https://www.social-protection.org/gimi/Emodule.action?id=65
5. https://documents1.worldbank.org/curated/en/100001588563785232/pdf/Adapting-Skills-Training-to-Address-Constraints-to-Women-s-Participation.pdf