Poverty and Women’s Work in the Informal Economy

High-Level Consultation on Promoting the Gender Equality MDG: The Implementation Challenge

16 February 2006, World Bank. Washington, DC, USA

Poverty is a daily reality for billions of the world’s people. More than 1 billion people are struggling to survive on less than $1 per day. Of these, roughly half are working. Thus, 550 million people — the working poor — cannot work their way out of poverty. And of these, some 330 million, or 60 per cent, are women (ILO 2004:3). They simply do not earn enough to feed themselves and their families.

Although the total number of people living in poverty declined during the 1990s, this overall decline masks dramatic inequalities among and within countries and regions. The drop was greatest in parts of Asia and more gradual in Latin America. But in sub-Saharan Africa, which already had the highest poverty rate in the world, it actually increased — millions more people have fallen into extreme poverty, with agriculture stagnating and productive employment opportunities virtually non-existent (MDG report 2005).

Today’s global world is one of widening income inequality and for many, especially the working poor, increasing economic insecurity. The lives of these working poor, both women and men, are the subject of UNIFEM’s Progress of the World’s Women 2005: Women, Work and Poverty.

The report emphasizes that informal employment, far from disappearing, is persistent and widespread. Thus opportunities for employment, too, are increasingly unequal — among countries and regions and among different groups within the population. Labour market segmentation has not disappeared with economic growth and restructuring; rather, labour markets continue to be segmented by gender, as well as by ethnicity, class and caste.

Informal employment is particularly important in developing countries, where it comprises half to three quarters of non-agricultural employment: specifically, 48 per cent in North Africa, 51 per cent in Latin America, 65 per cent in Asia and 72 per cent in sub-Saharan Africa. If informal employment in agriculture is included, as done in some countries, the proportion greatly increases.

For women the situation is even more critical. In developing countries, informal employment is typically a larger source of employment for women than formal employment and a larger source of employment for women than for men. In sub-Saharan Africa, 84 per cent of women non-agricultural workers are informally employed compared to 63 per cent of men; in Latin America it is 58 per cent for women compared to 48 per cent for men.

Within the informal economy, moreover, women are concentrated in work that is insecure and badly paid, with high risks of poverty. A gender gap in earnings exists across almost all employment categories, including informal wage employment and self employment. We therefore find a hierarchy of earnings in different types of informal employment, ranging from employers and own-account workers, mainly men, at the top, to home-based workers, mainly women, at the bottom. This corresponds to a hierarchy of poverty risk among households, depending on whether they have some formal sources of employment income or are limited to informal sources, and on what type of employment is the main source of employment income.

This trend was unforeseen. In the 1960s and 1970s, it was widely assumed that worldwide, development of the modern economy would shrink and absorb informal sector employment. Instead, the global economy has shown a tendency to encourage precarious forms of work. The modern industrial system has not expanded as fully in developing countries as it did at an earlier period in developed countries. Such production more typically takes place in family businesses or in single person units, while traditional, more personalized systems of production and exchange still obtain in agricultural and artisan production. But in today’s global economy, both traditional and semi-industrial relations of production and exchange are being inserted into the global system of production. Authority and power tend to get concentrated in the top links of value chains or diffused across firms in complex networks, making it difficult for small entrepreneurs to gain access, compete and bargain and for wage workers to negotiate fair wages and working conditions. Intense competition among small-scale suppliers along with the market power of multinational corporations mean that the major part of the value produced across these value chains is captured by the most powerful players.

Despite this reality, work and employment are not priorities in either the Millennium Development Goals (MDGs) or in Poverty Reduction Strategies (PRSPs). Though most PRSPs make the link between high levels of poverty and lack of decent employment opportunities and some specifically highlight informal employment as a problem, their policy prescriptions generally do not address these issues. Only 5 of 41 PRSPs recently reviewed by UNIFEM set any target for employment, and only one (Viet Nam) included a target for women’s employment. If the PRSPs are to be truly MDG-based, it is vital that they tackle the issues of gender equality and informal employment.

The main attraction of informal employment for employers is the absence of regulation, allowing them to lower the costs of labour. Increasingly, formal sector employment depends on units of the informal sector to undertake production by means of subcontracting and outsourcing; the line between the two sectors has thus become harder to draw. This means that the most basic difference between formal and informal parts of the economy is not regarding access to credit or markets but the absence of regulation and lack of legal and social protection for workers in the informal economy as well as the latter’s lack of voice and political influence.

This is an important reality to consider as we redouble our efforts to implement the Millennium Development Goals, especially reducing poverty and hunger. The link between the poverty and gender inequality is especially critical in a world characterized by increasing conflict and violence and the spread of HIV/AIDS. Conflict and the scourge of HIV/AIDS are a major source of poverty, and poverty in turn breeds conflict, creating a vicious circle. It is no coincidence that countries with the lowest Human Development Index have suffered from civil wars in recent years, and over half of the LDCs have gone through major armed conflict in the last 20 years.

In fact, poverty is not a static situation. It is generated over and over by different and changing processes, including the privatization of resources that once were free — such as water — the imposition of health and school fees, and the privileging of affluent countries and corporate power in the complex negotiations over trade and market liberalization.

Moreover, we cannot talk about poverty without talking about women. Poverty among women is multidimensional, and includes not only lack of income, but lack of autonomy, dignity, leisure and freedom from violence. Poverty is also experienced in gender-specific ways — for example, women sell their assets first, eat last, are pulled out of the productive sector as they forced to take on the care of family and community members that was formerly provided by the state. Finally, poverty is often transferred from generation to generation along the female line, as we see women trafficked with their daughters, and girls pulled out of school to help meet basic survival needs.

The creation of opportunities for decent work for women is therefore not only a basic human right; it is critical for reducing poverty and gender inequalities and breaking the links identified above. To take just one example, it is widely recognized that when women have control of income and resources, much more is spent on children, and children, including girls, get out of poverty. Enabling women to realize their productive potential also has enormous benefits for national economies, especially in LDCs.

So what can be done?

The Quick Impact Initiatives for Gender Equality paper prepared for this meeting lays out two strategies that countries can adopt to reduce gender inequality in employment. One focuses on providing access to credit and finance as a way to enhance women’s asset ownership and saving. The other seeks to increase women’s labour market opportunities through guaranteed employment schemes, modeled along the lines of public works programmes. The paper lays out the economic and social conditions needed for these strategies to succeed as well as the measures that need to be taken to ensure they are gender sensitive. It recognizes that they cannot substitute for long-term investment in skills development and upgrading and the creation of decent employment and investment in skills development and upgrading. The brief summary of guaranteed employment schemes shows that these have been most successful in terms of short term poverty alleviation and in some cases, development of community infrastructure, rather than in terms of upgrading women’s job skills or improving their access to employment opportunities. The examples are presented not as long-range solutions, but as short-term initiatives that can demonstrate that change can happen, and results can be achieved.

In building for the longer term, governments can put in place a range of policies to enhance women’s economic security, leaving them less dependent on the insecure jobs that barely sustain them. A number of legislative changes can be made without entailing additional resource commitments. Examples include the revision of labour laws to eliminate gender discrimination and ensure equal protection, and the revision of laws and policies that restrict women’s property and inheritance rights and leave them little opportunity to improve their assets base.

When it comes to the more difficult task of implementation, investment in human capital is critical, including investing in the skills that enable women to compete in a changing global economy. The capacity to provide more productive and satisfying work in a competitive labour market, and the just distribution of the benefits of work are also fundamental to the democratic and open societies that foster human development. In order to eliminate feminized poverty, governments must look beyond issues of social protection, or even legislative provisions. Attention needs to be focused more strongly on integration of a gender perspective into national budgeting, into taxation and investment, into financial and credit markets, into export policies and employment generation, into agricultural and land policies. Governments can also work to remove systemic policy biases that undervalue women’s work, while promoting a dynamic sub-sector in which women are concentrated.

But governments, especially in low income countries can not be expected to do it alone. Corporations also have a role. As governments recognize the importance of investing protecting their human capital, they need to insist that corporations respect international standards and minimum wages. Corporations in turn have an interest in making sure that governments provide the kind of social protection needed for a healthy and productive work force. Governments and corporations can work together to create innovative and productive partnerships — such as the partnership supported by UNIFEM between the Government of Jordan and CISCO Systems to enhance women’s access to and control over the benefits of Information and Communications Technologies and which is now attracting additional corporate partners, including Microsoft and Lego Robotics.

Beyond this, international financial institutions also play a role, in re-evaluating the kind of market liberalization and economic restructuring policies that have allowed unregulated businesses to thrive. The capacity to respond and manage trade liberalization varies enormously, especially in poor countries. For liberalization to succeed, rather than proceeding at full steam, attention should focus on the quality, timing, sequencing and scope of liberalization, as well as the need for the process to be accompanied by supporting actions, such as the strengthening of local enterprises and farms, human resource and technological development. In other words, developing countries must have the ability and flexibility to make strategic choices in finance, trade and investment policies. They must be free to adjust the scope and rate of liberalization and do so in combination with parallel strengthening of the viability of local firms and farms.

Ultimately, there must be a transformation of policymaking at national, regional and global levels. This requires that informal workers are visible and their work valued. To make women’s informal work visible, gender-sensitive, disaggregated statistics on national labour forces must be developed, analyzed and used in creating policy that focuses on economic security and rights. Unpaid labour in households must be included within the system of national accounts so that women’s contributions to the economy can be recognized and valued. Valuing the work that both women and men do is the starting point for meaningful policy decisions.

For this to happen, however, organizing of all kinds is critical. For UNIFEM this means support to women’s organizing — in this case to organizing poor informal workers to create the space needed to change policy and obtain legal and social protection. Unless women are empowered to demand their rights as citizens and as workers, the basic structures that govern their lives will not change. Women acting alone can bring about only limited change.

Finally, what kinds of national development strategy, including governance and accountability mechanisms are required to ensure that poor women can escape from poverty? What kind of global rules are required to regulate markets, and guide the priorities of international economic institutions towards better globalization? What are possible policy tools, options and approaches we can support to valorize and fully develop the potential of women as agents of change for poverty reduction, especially in low income countries.

These are the questions we should work together to answer as we address the implementation challenge of all of the MDGs, starting with MDG 3.