IEMS Report on Home-Based Workers Sheds New Light on Informal Employment

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By Sally Roever

The Informal Economy Monitoring Study (IEMS) is the world’s first longitudinal study of informal employment that combines structured comparisons (of ten cities and three occupational sectors), rigorous qualitative and quantitative research, and collaboration between researchers and grassroots workers’ organizations. An initiative of WIEGO and the Inclusive Cities project, the IEMS examines the systemic drivers that shape working conditions for home-based workers, street vendors and waste pickers.

 

 

“Inflation is killing us.”

Such is the sentiment of a home-based worker in Lahore, Pakistan. Home-based workers produce goods and services for the market from within or around their homes. They have little to no visibility in policy. And yet they form a key component of value chains in many branches of industry, from garments and crafts to automobile parts and electronics.

Conventional wisdom says that the informal economy serves as a buffer during hard economic times. But home-based workers in countries with double-digit inflation in recent years say they acutely sense its effects. Mostly women, they have little power to bargain for better wages from contractors, so they absorb the cost of inflation by reducing household consumption. For many, this means eating less, avoiding the doctor, and not paying school fees.

Home-based work is one of the most common occupations for women in cities around the world. In urban India and Pakistan, home-based work accounts for about one third of women’s employment. Globally, home-based work is one of the largest occupational groups in the informal economy.

Home-based workers enjoy few protections, bear high costs for low-quality infrastructure, and have limited market power to negotiate better prices for their goods. Today, WIEGO and its Inclusive Cities partners launch the Informal Economy Monitoring Study (IEMS) sector report on home-based work, which details these findings.

This first of three IEMS sector reports presents evidence on the systemic drivers that shape working conditions for home-based workers in three cities — Ahmedabad, India; Bangkok, Thailand; and Lahore, Pakistan — and their responses to these drivers. These include macroeconomic trends such as inflation, city government policies and practices, and value chain dynamics.

Home-Based Workers Need Cities and Vice Versa

One of the striking themes of the report is how much home-based workers engage with and rely on urban infrastructure and city services even though they work at home.

Home-based, writes the report’s author Marty Chen, does not mean home-bound: self-employed home-based workers must go out and source equipment and raw materials to make their goods, then find buyers for them. Sub-contracted home-based workers have to pick up raw materials from contractors and deliver finished goods to them. All this means using transportation services. Many live in settlements that are far from markets and have unreliable public transport. Having to pay for long-distance private transport adds up: transportation accounts for 30 per cent of home-based workers’ total expenditures.

Because the home is the workplace, these workers also rely on—and pay for—electricity, water, and sanitation. Recurrent load shedding is a major issue in Lahore: “our houses are small and closed and we can’t work in the dark,” said one worker.

Yet they are still expected to deliver finished goods on time: “if we don’t deliver on time the contractors scold us and stop giving orders.” Several workers also noted that when the power goes out, so too does the water pump, so that the household cleaning and cooking are delayed. To cope, they work as fast as they can while the power is on: “we don’t even take the time to drink water so that we don’t waste light time.” Or they work in the dark and expose themselves to injury — or use candles and expose their raw materials to catching fire.

Unsurprisingly, slum evictions and relocations have a huge impact on home-based workers’ ability to earn. Study participants in Bangkok had been forcibly relocated from central Bangkok in the late 1980s or early 1990s. Once relocated, it took 8-10 years for them to negotiate basic infrastructure for their new settlement, and even longer for paved roads and bus service. In focus groups, participants agreed that employment opportunities were better when they lived in the central city.

Despite these disadvantages, home-based workers across the three cities also noted how much they contribute to cities, including goods that supply both ordinary citizens and formal enterprises, tax payments on purchases and city services, and earnings that go toward paying their children’s educational fees.

Earnings Are Low and Unstable, but Essential

Home-based workers have low earnings, and those earnings can be disrupted by a number of risks. Contractors sometimes supply low-quality raw materials that slow the production process. Some supply materials containing toxic chemicals that cause health problems. Delayed payments for finished goods are common. And deadlines are not extended to compensate for power outages or subpar materials.

Those who work for piece rates have gross earnings between one and three US dollars per day. Net earnings in Ahmedabad and Lahore come out to less than a dollar a day. But these meager earnings represent a lifeline for home-based workers’ households: 78 per cent live in households for which the main source of income is informal employment.

Most said when their earnings go down, they cope by reducing expenditures. In Ahmedabad and Lahore, where double-digit inflation has meant increases in the cost of food, education and health care in recent years, many were cutting back on meat, vegetables and flour.

“We eat only twice a day instead of three times,” said one Lahore worker.

Organizations Provide New Models for Bargaining

Historically, Chen writes, labor laws and labor market theory have rested on an “employment relationship” between independent employers and dependent employees. This research shows that many home-based workers are neither independent nor dependent. Self-employed home-based workers are not fully independent in that they have high exposure to, but low protection against, production risks. Sub-contracted workers are not fully dependent in that they take on some of the entrepreneurial risks and costs of production that would be reserved for employers in a formal employment relationship. In both cases, these workers have limited bargaining power in the value chain and with city officials.

What then do these conditions imply for improving working conditions?

First, membership-based organizations of home-based workers in each city are supporting their members in bargaining and negotiations. The Self-Employed Women’s Association (SEWA) in India, for example, has trained its members to demand higher wages from the traders who buy their goods.

Second, they campaign for social protection and changes in the legal structure that would benefit home-based workers. HomeNet Pakistan and HomeNet Thailand, for example, have both advocated for laws protecting home-based workers and campaigned for their members to be included in existing programs.

Third, these organizations provide worker education, training and capacity building so that workers will know their rights. This is no small feat: as one worker said, “we are no longer afraid to speak up.”