Economic effects of the Covid-19 pandemic on the informal economy: who has fallen into poverty?

Strupat, Christoph
External Publications (2022)

in: Rudolf Traub-Merz / Manfred Öhm / Julia Leininger / Florence Bonnet / Henrik Maihack (eds.), A majority working in the shadows: A six country opinion survey on informal labour in sub-Saharan Africa, Bonn: Friedrich Ebert Stiftung, 41-48

ISBN: 978-3-9862814-3-4
Volltext/Full text

The Covid-19 pandemic has triggered a major global recession. Widespread fear of contracting the virus, combined with strict policy measures to contain its spread have caused severe disruptions in livelihoods. To understand the full impact of the pandemic on low-income countries, it is necessary to consider the informal economy. People in informal employment are particularly vulnerable to the negative health and economic effects of external shocks such as the pandemic. This chapter presents descriptive evidence from in-person surveys in the informal economies of Côte d’Ivoire and Ethiopia in order to provide a complete picture of the economic impacts of the Covid-19 crisis. The results show that the economic activity in the informal economy has been strongly affected by the Covid-19 pandemic. On average, 60 per cent of households in the two countries face an income decline and 20 to 30 per cent lost jobs and work opportunities. Income poverty levels have increased by around 20 percentage points. The profile of those that have fallen into income poverty due to the pandemic differ substantially from those of the already poor. The new income-poor are more urban, younger and better educated, relative to the former poor. From a policy perspective, further assistance needs to be provided to countries with large informal economies to prevent further impoverishment. It is necessary to create adaptive social protection systems that can respond better to new vulnerabilities caused by shocks and that are able to cover the informal sector by enrolling additional beneficiaries (»the potential new income-poor«) in existing programmes or to create new programmes.

About the author

Strupat, Christoph

Economist