Introduction
Global recessions have far-reaching effects on economies, but the worst-hit are often the poor, especially those working in the informal sector. The informal sector, also known as the unorganized sector, includes workers who do not have formal employment contracts, social security, or labor law protections. These workers often live on the edge of poverty, and even small economic shocks can push them deeper into hardship. In this article, we will highlight the major impacts of global recessions on the poor working in the informal sector.
Loss of Jobs and Incomes
One of the first effects of a global recession is job loss. Since informal sector workers usually have no job security, they are among the first to lose employment when businesses reduce their operations or shut down.
- Daily wage workers, street vendors, domestic workers, and construction laborers often lose their livelihoods overnight.
- These workers usually earn hand-to-mouth and have no savings, so even a few days without income can lead to severe hardship.
Increase in Poverty and Inequality
Global recessions worsen poverty levels. When informal workers lose income, they may not be able to afford basic needs like food, shelter, healthcare, and education for their children.
- The gap between rich and poor widens as the poor become poorer, while those in the formal sector might still retain some protection.
- Children from poor families may be forced to drop out of school to work and support their families.
Lack of Social Protection
Unlike formal sector employees, informal workers are not covered under most government welfare schemes like unemployment benefits or health insurance.
- During economic crises, there is no safety net to support these workers.
- Women in the informal sector, who often juggle both paid and unpaid work, are especially vulnerable during recessions.
Impact on Women and Children
Women make up a large part of the informal workforce, especially in domestic work, garment industries, and small-scale vending.
- In times of recession, women are often the first to lose jobs and the last to be re-employed.
- Children from affected families may suffer from malnutrition, lack of education, and even be pushed into child labor.
Mental and Physical Health Issues
The stress of losing income and job insecurity can lead to mental health issues like anxiety and depression among informal workers. In addition, lack of money leads to:
- Skipping meals or eating less nutritious food
- Postponing or avoiding healthcare and medicines
- Increased risk of chronic illnesses and diseases
Migration and Urban-Rural Displacement
During global recessions, many informal workers who have migrated to cities for work return to their villages due to lack of jobs.
- This reverse migration increases pressure on rural areas that are already struggling with limited resources.
- It also disrupts children’s education and healthcare access.
Examples from Recent Recession (COVID-19 Pandemic)
The economic slowdown caused by the COVID-19 pandemic is a recent example of how global recessions impact informal workers.
- In India, millions of migrant workers lost their jobs during the lockdowns and had to walk back to their villages.
- Informal sector workers saw sharp declines in income, and many households went into debt to survive.
Conclusion
Global recessions have a devastating impact on the poor in the informal sector. These workers often have no safety net, and their survival depends on daily earnings. When a recession hits, they face immediate and long-term challenges that affect not just their livelihood but also their health, dignity, and future opportunities. To protect them, governments and societies need to build inclusive policies, strengthen social protection systems, and recognize the importance of the informal sector in the economy.