VOICES OF THE VULNERABLE
"I am truly frightened of [the] monster called the financial crisis.
It has devoured poor people like us. Is anyone listening to our silent cries?"1
In mid-2008, it was thought that parts of the developing world –
particularly those countries that were less integrated into global
financial markets – would be buffered from the impact of the financial
crisis. Instead, contagion has been almost instantaneous and millions
of people across the world have felt the effects as the financial crisis
catalyzed a global economic downturn.
We now know that declines in consumer demand and related trade
shocks, a slow-down in remittances, a reduction in private capital
flows and decreasing economic growth prospects in many developed
and developing countries are the key transmission channels that link
Wall Street to the people living in cities, villages, and communities
worldwide. There are concerns that foreign aid will be reduced, further
stoking the crisis in recipient countries.
Near the village of Yard, just two kilometres
from the gate to Ol Pejeta in
central Kenya, a simple wooden cross
was erected recently in the middle of a
maize field. Several men are standing
aimlessly near the road. One of them is
James Mwangi, a former farmer, leaning
on the wooden fence, with a bitter
expression on his face. "I heard about
the global recession”, he says. “But it felt
too distant. Now, we can all feel its impact.
We have no jobs, no money and
almost no food."2
One year after the crisis’ onset, we are able to paint a partial picture
of how countries, regions, households and individuals have been
affected. Much continues to be speculative, but we can discern some
general trends. This report seeks to demonstrate that while people
may live far apart on different continents, their experiences – as revealed through recent studies and their own
testimonies – often share many commonalities.
There are strong indications that the economic crisis has had its most immediate and direct impact on three
categories of near and working poor: workers employed in the formal sector, workers in the informal sector,
and international and domestic labour migrants. A fourth category, agricultural cash-crop farmers, also needs
to be watched carefully.
Large numbers of workers employed in the formal sector, especially manufacturing, commerce and
construction, have lost their jobs; while others are experiencing cuts in working hours, wages and health or
pension benefits. Based on data from 1991 onwards, 2009 will represent the worst global performance on record
in terms of employment creation. The ILO estimates that between March 2008 and March 2009, 4.4 million
workers in the manufacturing sector lost their jobs, along with 1.7 million workers in construction and 1.1 million
in wholesale and retail trade. Global unemployment is likely to rise by 39 million between 2007 and 2009.
In the worst-case scenario, global unemployment could increase by up to 61 million people over this period.3
In El Salvador, Ruth Cerna was one of
1,700 workers to be fired in November
when a factory making machine parts
closed down: “Many women were
pregnant; many are ill and are left with
nothing. It’s been three months since
the factory closed, and we haven’t been
paid anything, no severance, no social
fund payments”, she said.4
In many countries, workers simply have no access to unemployment benefits and are forced to seek any
form of employment, often leaving them in precarious situations, without social protection and a voice at
work. Workers who had previously climbed out of the categories of the poor or extreme poor now are finding
themselves sinking back downwards. Employment-intensive sectors – which had helped to pull many people
out of poverty, especially women – have been particularly hard hit by the crisis. As many as 222 million
additional workers worldwide run the risk of joining the ranks of the extreme working poor over the period
2007–2009.5
The economic crisis has also exacerbated the problem of youth
unemployment. Young people looking for their first jobs are finding
the doors slammed in their faces. The numbers fall into perspective
when considering that it took ten years for youth unemployment to
increase by 8 million to reach 71 million in 2007.6 If we fast-forward to
2009, the number of unemployed youth could increase by as many
as 18.2 million in just one year.7 The prospect of large numbers of
unemployed youth in the streets should give us pause, particularly
in countries with already high youth unemployment rates.
There is strong evidence that workers in the informal sector,
servicing those formal sectors hit by the crisis, have seen their
incomes plummet, their working hours increase and their business
costs skyrocket. In the past, it was assumed that the informal
sector could act as a cushion in times of economic crisis. Today, this no
longer seems to be the case. In addition, and less expectedly, those
who trade in informal local markets like street vendors or waste pickers
have also been affected, seeing both the demand and prices for their
goods decline.
Chaya, widowed at 20 years of age with three young children to
care for, has been a waste picker in Pune, India, for many years. "Life
as a waste picker has never been luxurious, but the Infosys work did
transform my work day and bring in a lot of stability. We ate at the
company canteen and had regular hours." Chaya was able to save
and took a loan of 40,000 rupees (about US$820) to buy a small
plot of land on which she constructed a little two-room house. She
sent her children to school. It all changed with the economic crisis.
The quantity of scrap exiting Infosys decreased dramatically. Her
earnings halved, and work time was reduced by a couple of hours.
Scrap prices also dropped. To cope, she has stopped buying meat
and fish and stays clear of the doctor.8
Across the board, informal sector workers like Chaya are experiencing
increased competition for reduced opportunities as formal workers
try to compensate for a loss of income by seeking opportunities in
the informal sector. Interviews and surveys of informal workers reveal
that they rarely have savings and tend not to be eligible for government
assistance, where social safety nets exist.
After losing her job, Sufia, a former
maid in Bangladesh, turned in desperation
to selling vegetables rejected by
wholesalers. “You never know whom
or in which way Allah has decided to
help you…I saw my neighbors going
to the bazaar to pick up rejected vegetables…
from that day my hunger won
over my dignity.” Sufia now sells these
vegetables in a corner of the market
and is able to earn enough money to
survive and even save.9
While the general trend indicates that jobs are being lost, there are
some perverse exceptions. Recent reports revealed that jobs are
being created among those willing to sell cheaper, unbranded and
unregulated food items, including products like vegetables that
were rejected by formal sector enterprises. Some new opportunities
for work have also been created in the garment industry, where there
has been a proliferation of sweatshops that offer employment to
the desperate.
Rana left Nepal for Qatar to work for a construction company. He had a contract for two years, but the company
dismissed him after 15 months, not able to afford to keep all the labourers due to the global economic
crisis. Rana had not finished paying back the loan he took to pay a broker to find him the job in Qatar –
100,000 Nepalese rupees (about US$1300). Helpless, he has returned to his village in Sitapur, Nepal. Since he
has no other skills, he has to rely on odd jobs with all the uncertainty that this entails.10
Rana’s story provides a window into the fate of the third broad category affected: labour migrants and the households that depend on them.
Evidence shows that not all migrants are affected in the same way. The rate of slowdown in regional and national
economies, as well as the dynamics within different employment sectors, gives rise to varying scenarios.
Migrants working in construction, manufacturing, hotels and tourism have been hit particularly hard. The impact
of the crisis also seems to be deeply felt by migrants employed in the informal sector and migrants working
in countries with weak social security systems. Interviews further indicate that recent migrants have suffered
more than those who had already worked as migrants for several years, and migrants from poor families
seem to have been affected disproportionately, as they tend to work in more insecure, low-skill segments of
the labour market.
Evidence also indicates that migrants with no official contracts who entered destination countries illegally
are experiencing extreme hardships. Many of these migrants cannot afford to return home, which makes
them particularly vulnerable to predatory employment practices. There are some reports that women migrants
are falling prey to traffickers. In some countries, a few sectors – such as health care, domestic service
and education – show improved employment prospects for migrants, but these do not seem to represent
the norm.
As migrants lose their jobs, have their hours cut or become less confident about their economic situations,
there is evidence that remittances are decreasing or being sent home less frequently. Some migrants have
been forcefully repatriated, while others who can afford the cost of a ticket home, voluntarily return as work
dries up. In addition, while there is no evidence yet of a mass return of migrant workers, reports show that new
outflows from some countries of origin have slowed.
Households that depend on remittances have, not surprisingly, suffered. Remittance flows grew rapidly during
2007 and 2008, reaching $328 billion in 2008. But signs indicate that remittances have slowed since the
last quarter of 2008. The World Bank has lowered its forecast for remittance flows to developing countries to
-7.3 percent in 2009.11 There are also examples of reverse remittances, with families back home having to bail
out family members abroad.
The wife of Vietnamese migrant worker in a Central European country vividly describes the difficulties
her husband faced after losing his job. "My husband telephoned me six months ago, saying that he was
hungry... He wanted to go home, but we needed to send him US $1,500."12
There is increasing evidence that a fourth category of people also may have been highly impacted by the global economic crisis: agricultural cash-crop farmers and the households that depend on them.
Jonas in Malawi tells his story. He produced 10 bales of cotton, each weighing 110 kilograms. He hoped
to sell his cotton at the Government price of US$0.54 per kilogram (MK75). This would have provided him
with a minimum income from cotton of US$1178.57 (MK165,000). However, this is not what happened. He
reported, “I am unfortunate, because the Great Lakes Company that buys our cotton says that the world
economy has shrunk and pushes the international cotton demand too low… I feel cheated as I wonder how
economic problems somewhere in America can make my cash crop suffer here in Malawi. It’s a shame that
I cannot boil and eat it.” If current prices hold he will not be able to cover his input costs, pay school fees for
his children and buy food and inputs for the next growing season.13
Reduced demand and lower prices for specific cash crops threaten the livelihood of large numbers of smallholder
farmers and their families in many parts of the world.
