Monica’s day usually starts at 3 am.
She’s the sole provider for her four children but she earns barely enough from her full-time factory job in Arima to pay her rent and food bills.
To survive, she gets up early to make aloo pies to sell before her shift begins.
Monica is one of thousands of people in T&T who have turned to the informal economy for survival.
And it’s a sector which continues to grow.
But COVID-19 has crippled the sector, leaving thousands of informal workers wondering how their businesses are going to survive.
In 1993, the International Labour Organisation coined the term “the informal sector” to describe the activities of the working poor.
Today, this sector accounts for nearly half of all workers in the world and it is expanding in both developing and industrialised countries, the ILO noted.
Lesmore Frederick, head lecturer, Labour Studies, Cipriani College of Labour and Co-operative Studies, says for decades the informal sector, or what others refer to as the underground economy, is a vast unfettered market encompassing everything from boulevard vendors to unlicensed taxi drivers.
He said this sector plays a significant role in economic development by creating employment as well as reducing underemployment.
Frederick also noted that a wide range of skills can be found within the informal sector and include, but are not limited to subsistence farming, catering, carpentry, car repairs, street traders, crafts, gardening and domestic work.
Additionally, informal sector workers are beneficial to the formal sector via the outsourcing of work. However, these workers are faced with many challenges including job security, poor wages coupled with the vast negative effects of COVID-19, Frederick said.
“The reality is all informal sector workers have been affected on the whole because there is no work. The sector contributes significantly to the country’s GDP as workers who are retrenched for instance turn to the informal sector,” Frederick added that the vast majority are single parents.
And even some of these children of informal workers who assist their parents in turn, even end up in the informal sector later on in life, Frederick added.
He said informal workers also “hire” other informal entrepreneurs who are also undocumented as they are not regulated or monitored by any form of Government structure or taxed.
“With COVID-19 job losses in the informal sector, therefore, has a domino effect,” he added.
But Frederick believes regularisation is not a simple answer.
Instead, he advised that the Government provide social capital to informal workers.
Measuring T&T’s informal sector
Economist Dr Regan Deonanan also agreed the informal sector contributes, in several ways, to any economy.
Measuring the size of the informal economy, however, he noted may be difficult.
He said one study estimated the size of the informal economy in T&T during the early 2000s to be approximately equal to 25 per cent of GDP.
The study’s estimate for T&T largely arose from the size of the tax burden, ie corporate and personal income tax rates were the largest incentives for people to work in the informal economy (Vuletin 2008), Deonanan noted.
This contribution, he said, was comparable to estimates for Barbados and Grenada but much smaller than the size of the informal economy in Jamaica (35 per cent), St Lucia (41 per cent) and St Vincent and the Grenadines (50 per cent).
Another study estimated the size of the informal economy in T&T during 2014 to be approximately equal to 28 per cent of GDP (Peters 2017).
“While the informal sector in T&T may amount to a smaller share of GDP when compared to many of its Caribbean neighbours, this equates to over $40 billion, approximately 500 per cent of manufacturing GDP or 80 per cent of petroleum GDP in 2014,” Deonanan indicated.
He added that early estimates also suggested that informal employment in T&T could amount to 25 per cent of total employment (Valtonen 2001), with self-employed people making up a large portion of this informal employment.
According to the International Labour Organisation in 2016, it was estimated that T&T had approximately 30,000 domestic workers, approximately five per cent of the labour force.
Impact of COVID-19
Deonanan noted that concerns over people in the informal sector being impoverished and support mechanisms that mitigate such challenges being reflected across the global economy for informal workers during the COVID-19 pandemic.
He said that due to the shutdown of non-essential services, there is a loss of income for workers such as street vendors.
“In addition, social distancing measures can affect the income of those providing transportation services such as taxi drivers.
“These self-employed workers do not rely on benefits such as sick leave and may, therefore, utilise savings or social assistance to address their expenditure gaps,” he added.
He said while several organisations in the formal sector can use virtual platforms for remote working for their employees, this is impossible for many informal workers, such as domestic workers and repair technicians.
An assessment of the informal sector in a few countries during this time by the Women in Informal Employment: Globalising and Organising, (WIEGO) indicated that informal workers are facing dire challenges.
In some countries, thousands domestic workers are unable to work as they are no longer needed or considered non-essential.
In other countries, thousands of street vendors are unable to operate, while market vendors providing fresh produce face reduced demand.
Informal sector must
not be forgotten
Economist Dr Vanus James also noted that the informal sector has taken a “heavy hit,” and advised that the Government must pay greater attention to informal workers.
He cited that in Jamaica informal workers receive small amounts of conditional cash transfers.
“There must be some mechanism to protect the income of self-employed persons and also those who may have employees. These persons must be targeted for protection,” James said.
He explained as COVID-19 continues to wrecked havoc on the world this country’s Government is yet to announce plans to specifically target the informal sector.
“The informal sector is part of the business community as well. You have to be protecting them as well. If a taxi driver goes bankrupt and loses his taxi, for instance, there have to be mechanisms to help them recapture their footing,” James suggested.
James also suggested that the sector ought to be regulated.
“We need to find a way to register informal workers and bring them into the loop. Jamaica is trying something like that, to make sure people pay their fair share,” James noted.
Minister in the Ministry of Finance Allyson West, when asked what assistance is being offered to informal workers said Government is seeking to assist all sectors negatively impacted by COVID-19, including those engaged in the informal sector.
In an email response, she said this sector comprised a significant part of the country’s economy and as such impacts the lives and livelihood of many citizens.
“Apart from the measures that we have already announced under the umbrella of the Ministry of Social Development and Family Services, as well as the measures we have discussed and agreed with the commercial banks, we are about to launch a soft loan programme for credit union members which we hope will impact a significant percentage of participants in the informal sector who are hurting at this time’” West said.
The relevant details are expected to be provided on Monday.
On whether the informal sector ought to pay taxes West said she is “firmly of the view that as a general rule all persons who earn income and/or own property in Trinidad and Tobago should contribute to the service of T&T.”
This, she added, includes members of the informal sector.
West said all citizens of T&T have access to the services provided by the State.
“The garbage man does not ask if you are registered or pay taxes before he collects your garbage, the doctor or nurse seeks no such information when you walk into a health facility seeking medical attention, nor the principal when you seek to register your child in a government-run or government-supported educational institution,” West explained.
She said it takes billions of dollars annually for the Government to supply the services demanded by the population.
“And while we can argue ad infinitum about the quality of that service, the need for and supply of that service continue. As such, it is incumbent on everyone to make some level of contribution to pay for the provision of those services,” West added.