Archive for the ‘Migrant worker’ Category

India recognizes the economic contribution of street vendors

Photo credit: Meena Kadri

Photo credit: Meena Kadri

What Indian economic phenomenon is at once marginal, even illegal, and enormously independent and entrepreneurial? That would be the street vendor, the small capitalist of the poor, and reservoir of off-the-books penalties that grease the machine of every municipal authority and police station in urban India.

There are an estimated 10 million street vendors (another term is the more pejorative “hawkers”) in the cities of India, functioning mostly in breach of a host of urban laws governing licensing, selling and zoning — and challenging bourgeois ideas of what a metropolis should look like. Street vendors have long battled to be recognized as a professional guild, not a shadowy underclass. Earlier this month, after more than a decade of agitation, the National Association of Street Vendors won a significant victory when the Lok Sabha, the lower house of parliament, recognized the rights of street vendors by passing the Street Vendors Bill, 2012.

The measure acknowledges that street vending is an economic reality that works to the advantage of both sellers and consumers, providing productive employment for many and cheap goods and services for the urban poor. The law contains several significant provisions designed to bring street vendors into far less ambiguous legal and economic terrain, and attempts to break down the high wall that currently divides them from city municipal corporations and resident associations.
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When the big picture on India’s economy is taken into account, it is pragmatic, as well as just, to not expose street vendors to the levels of harassment they currently face, and to bring them into the tax system and the ranks of the urban citizenry. After all, they are the stars of India’s vast “informal economy” — those without contracts, social security or employer benefits — inhabited by more than 80 percent of the country’s 450 million workforce.

It is beyond the capacity of any government, or of Indian business, to integrate into the formal sector such a large pool of what classical economics would call “reserve labor” — a group that is growing at a rate of 1 million people a month. Street vendors, by contrast, can claim to be a class of 10 million workers who generate employment for themselves and value for the poor around them. An essential, if underacknowledged, part of the story of Indian capitalism, street vendors have long deserved a new deal from the Indian state, and at long last they’ve got one.

Source: Bloomberg

Reflecting on this blog’s genesis after 5 years

I started this blog in late December 2008, in earnest and every day during the first prototype fieldwork for The Prepaid Economy project, one of the iBoP Asia Project’s first batch of Small Grant winners from the ASEAN region. For the first 5 months of 2009, this blog was on the mainpage of my website as I felt my entire enterprise – Emerging Futures Lab – was being entirely supported by this grant.

It was only in April 2009 that I began my next phase in advancing my experiential knowledge of preparing, planning and programming research using design ethnography tools from the field of user centered design (UCD) when I moved to Helsinki, Finland on a project with the then Helsinki School of Economics (HSE) and now a part of Aalto University. This university is the result of an academe-led innovative merger of the independent schools of business, design and engineering (science) which was manifest tangibly in the form of an experimental platform for interdisciplinary innovation research and pedagogy known to all as the Design Factory.

Everything that I came to understand about the patterns at play in the informal rural economies of the developing world was in one way due to conversations and whiteboarding exercises with the wide variety of people accessible to one in the factory. It was only later that it received the formal name of Aalto Design Factory, for most of its first year of existence it was simply “the df” or “df” to all of us early adopters and believers in removal of barriers and silos to effective communication, cooperation and collaboration.

In retrospect, I could have analysed a lot more with the rich deep dive of data I had gathered after my immersion in the field. I had spent 10 days off the www in a rice growing barangay in Iloilo, The Philippines and a similar amount of time but less direct inhome experience in rural Rajasthan, India. On the other hand, in the numerous projects since then, the layers of understanding the balance of flow – the give and take of transactions of value between trusted referrals, juggling the factors of “time” and “money” in order to smoothen the volatility between in the incoming cash and outgoing for daily needs and other expenses – have only deepened in nuance and understanding.

This research path was set upon in late 2008 – just around now, in fact since the deadline for applying for the iBoP/IDRC’s Small Grant was the first week of September. It has been 5 full years on wondering about the inherent conflict between periodic, calender based payment plans, monthly subscriptions and other regular inflows of cash, often paid as a bill of unknown amount due in the near future or as hire purchase payments AND the irregular and sometime unpredictable income streams from a variety of sources relied upon by the vast majority of the world’s households for managing their household finances.

Why the prepaid business model works so well for the informal economy, the base or bottom of the pyramid (BoP) and the seasonal ebbs and flows of the rural economy can all be explained by simply pointing out the fact that this pay as you go system hands over the control over amount to be paid and date it is due to the end user – something that Donald Norman, father of user centered design (UCD) has also pointed out as a factor in user satisfaction with a product and its design.

About 12 months ago I completed fieldwork that took my original primary research on the prepaid economy and its decision making behaviour in order to better inform business models and payment plans and went a few steps further into comparative analysis of experimental results. I was able to compare the sales results of a product line across 4 different variations of payment plans being pilot tested among rural offgrid residents in 2 East Africa Community countries.

This was almost as good as a direct test of the original hypothesis that the greater the span of control over time (duration, frequency, periodicity) and money (amount, cash or kind) a business model offered a member of the informal economy, the better the long term chances of sustaining the enterprise. In fact, I was able to add one more factor to the equational mix which was not considered when I first began this work.

This is what I call “Face time” or combination of social capital, daily proximity and interpersonal relational mix – that which allows you to negotiate on terms of payment such as time and amount with someone to whom you owe this cash or payment and the limits of this negotiation are bounded by the limits of trust between the two of you.

Face time  and Flexibility were the two main attributes of the 4 business models being pilot tested that seemed to capture the range of responses, performance and feedback, yet allow us to distinguish what was different in each model, thus what might have influenced a change.

None of this research was quantitative but completely qualitative groundclearing work to discover insights that would inform more relevant and appropriate business models and other market entry tactics to maximize, within constraints, the adoption rate of innovation (a new venture, a service or business model, an invention) among the population without regular paychecks and easy access to consumer credit. This work has also validated my hypothesis that the tools from user centered design could be used to advantage to grasp and make sense of more complex and wicked problems than could be understood by simple numbers alone.  The methodology being part of product development process also allows for company’s to reach a faster path to market with an innovative product or service or revenue stream in entirety.

The original fieldwork in agriculture dependent rural economies in ASEAN and South Asia and the early work in Africa, all looked at the bulk of such a population, the lower income segments at the BoP. But now with the rapidly emerging global middle classes i.e. those displaying regular patterns of consumption, this knowledge gained can also help assess the worldview and consumer mindset of the emerging consumer markets of sub Saharan Africa.

There is so much yet to be learnt and every single actor is breaking new ground, whether its Econet Wireless and MKopa with their airtime or mobile money pay as you go solar lights and charging or whether its every social enterprise trying to sell a cookstove, a lantern or a water pump to the subsistence farmer. We need to document every instance of success so that patterns of what worked might be of help to better refine and improve our models for market creation at the very end of the global value chain.

The Great Informalisation: About 50% of Indian GDP from unorganized sector

From a special report on India’s economy

It might surprise some to know that most of the debates on labour issues in India, including the provision of social security & workplace challenges, actually revolve only around 7% of the total workforce.

And yet, as India integrates with the global economy, its the 93% majority that in some ways providing the resources to keep the country competitive and productive. The term is informalisation. And with increased sub-contracting due to globalisation and liberalisation, there is the universe employers are increasingly turning to.

GRAPH-13GRAPH-2-TRADING-DOMINATES

According to the National Sample Survey Organisation, in the year 2009-2010, the total employment in both the organised and the unorganised sector in the country was 465 million. Out of this, only 28 million (7%) were in the organised sector while the remaining 437 million (93%) was in the unorganised sector.

But on the other hand, the informal sector that provides employment to 93% of the work force accounts and accounts for, hold your breath, about 50% of the GDP.

Promoting Africa’s Informal Sector

Organising the informal sector and recognising its role as a profitable activity may contribute to economic development. This can also improve the capacity of informal workers to meet their basic needs by increasing their incomes and strengthening their legal status. This could be achieved by raising government awareness, allowing better access to financing, and fostering the availability of information on the sector.

Authorities’ awareness: Policy-makers in Africa should recognise the important role informal sector companies play in the economy. Associating the informal economy to criminal endeavours or tax evasion is not a good way to formalise the sector in Africa. There is a need for African governments to coordinate their policies and strategies in order to support the formalisation of the sector. Effective regulatory framework, good governance, better government services, improved business environment, and improving access to financing, technology and infrastructure are essential in this process. In that regard, development partners have pledged their commitment to support the formalisation process. This includes mainly the promotion of social protection to workers in the informal sector and support to small and medium-sized companies, which account for the bulk of Africa’s informal economy.

In addition, African policy-makers should be aware of the heterogeneity of the informal sector. According to a recent study on West Africa, governments should distinguish between small and large informal firms. The latter category plays an important role in the economy comparable to the role of major formal firms. Thus, African governments should adopt specific policies to bring large informal firms under formal regulation. For this, a systematic approach should be adopted in order to enforce a comprehensive regulatory regime including, for instance, registration for a formal tax regime.

Better access to financing: Limited access to funds is one of the major factors explaining the development of the informal economy. Facilitating access to formal financing channels such as micro-credit could be an overriding step to encourage informal entrepreneurs to shift toward more formal economic activities. However, raising the awareness of large conventional commercial banks of the potential of the informal sector is also essential.

Improving access to information: The fact that the informal sector has for a long time been neglected by policy-makers has not helped in generating knowledge on this sector. For instance, informal activities are often invisible in official statistics. In order to analyse the contribution of the informal sector in the economy, it is important to collect and maintain relevant information. This includes a wide range of information, such as the characteristics of actors, tax collection, impact on employment, working conditions, and productivity of informal companies.

Mthuli Ncube is the chief economist and vice president of the African Development Bank

The Letter writer: Yesterday’s social mediators

Letter writer Mr Thangaraju s/o Singaram, who is 85 years old and was from Tamil Nadu, India.

Click to enlarge and read the stories of those who were lucky enough to have been educated when they migrated looking for work. They made their living helping others… as the Tamil letter writer Mr Thangaraju says, we weren’t just letter writers but counsellors, mediators and therapists, helping illiterate migrant labour keep their connections alive across the miles.

Vignettes from Singapore’s past: Independent Women

Look up more on Samsui women , pioneering globe trotting. independent employment for women.

The Samsui women were a proud and independent lot. Prostitution, opium peddling and various vices were common with other women mired in poverty. However, Samsui women chose to be engaged in hard labour with little pay instead of being lured into vices even if they paid more. They found employment in tin mines, rubber estates, on construction sites and as amahs or “domestic servants”. They were hired extensively at construction sites in the 1950s. They carried rocks, dug holes and conducted menial work that defied their small physical stature.

They wore a red head dress which became their trademark feature. The red head dress was a square piece of blood-red cloth folded in a way that it sat like a fairly large rectangular roof on their heads. Their hair was combed into a bun or “pigtail” or towchang and tucked under the red cap. The towchang was a mark of their spinsterhood. They dressed in a stiffly starched black samfoo (sometimes spelt samfu), a tunic-and-trouser suit, protected by an apron. The sandals they wore were pieces of rubber cut out from used tyres and fashioned on their own with a strap. 

Informal Economy Problems: Chinese BoP in Africa

Market forces led to the increasing visibility of the street hawkers from China in the informal markets of Africa. Mostly lower income and uneducated, Chinese traders are rapidly becoming the bane of African markets, much like how cheap, Chinese goods disrupted the local informal trade in the early years of the century.

An indepth look at the lives of these enterprising migrant workers has recently been conducted and the findings giving rise to numerous perspectives on the problem. Probably the most critical with respect to future trends is this one from the Financial Times:

Many are independent informal-sector entrepreneurs, and the most visible have been the Chinese traders establishing themselves in marketplaces from Lagos to Lusaka.Using contact networks from home or among other migrants, they establish supply chains which import Chinese goods at a price and volume that existing traders struggle to match.

As well as angering local rivals, these newcomers also raise the heckles of African governments who prefer Chinese migrants to be large-scale investors creating new employment rather than direct competition for established local enterprises.

In July, the Malawian government introduced a law banning foreign traders from operating outside the major urban areas, following protests against the impact of Chinese immigrants on Malawi’s small businesses.

Such complaints are now familiar in other parts of Africa.

Oh dear, history has been known to have a tendency to repeat herself quite well. Sitting here in Singapore, near enough to Malaysia, one cannot help be aware of the history of this region and the role that initerant Chinese migrant labour from Southern China has played in developing this city into a world class capital.

But will that happen in the various African countries responding above in the snippet? And would a little bit of competition provide the impetus for laidback rural markets to suddenly hop and jump like bazaars tend to do in the East? We don’t know, we’ve never seen it happen so in front of our eyes, only recalling bits of history from our pasts. @bankelele tells me about a book he’s reading on the Economic History of Kenya and the tensions inherent in the three pronged population of locals, the British and the Indian traders. Yet, one cannot deny the historical influence of a multicultural trading society such as on the Swahili Coast and by the way of the East African Railway, on the quality of entrepreneurship in Kenya as acknowledged by all their regional neighbours.

Even tiny little Singapore acknowledges the value of injecting external influences on the quality of future innovation by encouraging migrant workers, of all professional levels, to arrive on the island and work. The tensions show up in the newspapers, even as we get accustomed to being served by Filipina sales people and Mainland China waitrons while a Bangladeshi may arrive to paint the house.

Meanwhile, Britain is upto her old tricks of stirring the pot of inter-ethnic discontent among people who live in her former colonies. They’ve been doing it so long that they are probably not aware of consciously recognizing the inflammatory nature of their handwringing “Will China eat our tea while India eats our lunch?” being the essence of the cries. China, in the meantime, emphasizes the opportunity by showcasing their “Africa Towns” springing up in trading cities. What shouldn’t happen, however, is the demonization of the Chinese migrant worker, like back in the early days of the previous century in California.

This is a difficult trade-off to make. Either path, at this point, makes sense.

Mapping global seasonality: national times of abundance and scarcity?

Connecting some dots made me think of this exercise. If national governments are increasingly looking at ways to bridge the informal economy with the formal, in order to provide more inclusive benefits to their citizens and at the same time there’s an increasing focus on providing inclusive financial services to those outside of the formal economy, then why don’t the overly large global institutions consider mapping national seasonality as a way to track regional abundance and scarcity?

Rather than applying existing metrics which result in a significant portion of the population slipping between the cracks, there is scope to develop measures of assessment where it is known that incomes are irregular, and tend to display seasonal patterns. This mapping need not be too granular in the first instance, even at country level it may be of help as another layer of information over the various surveys conducted.

India, for example, has long known the linkage between the state of her monsoon season and that year’s economic performance, even for organizations and people who are not directly connected to the land and its produce.  Recently, I did something similar for Kenya, mapping the ebb and flow of local income in three different regions and was able to arrive at a rough estimate for a nationwide time of abundance – a peak sales season, if you will.

Highly industrialized nations have detached themselves from the land and the natural seasons, thus the impact of the rains or the dry season on economic activity are barely perceived. In emerging economies and still developing nations where a greater proportion of the population is rural based and food security more vulnerable to weather changes, these elements can influence national GDP or consumer durable sales.

Whether its segmentation of rural markets for companies or policies of financial inclusion on a global scale, I believe this additional layer of information has the potential to provide some crucial nuances to information currently being analyzed, and found wanting.

African Traders in Guangzhou, China: Routes, Profits, and Reasons

While digging around for information after my recent flight where I was offered an upclose and personal look at increasing informal trade between Africa and China, I came across this research paper by Yang Yang from the Chinese University of Hong Kong. A snippet from the introduction:

Based on my fieldwork in Guangzhou, this paper attempts to explore the routes, profits, and reasons of the African traders in southern China through individual stories. It discusses the organization of the market as well as individual economic activities reflecting a globalization from below, where traders with relatively small capital become upwardly mobile by standing on the shoulders of the giants, or more directly, by selling their Herculean sandals out from under them, that is, by taking advantage of the infrastructural advancements made possible in the modern age of globalization, such as fast international transportation, convenient communication, mass manufacturing, brand recognition, for short term gains.
The trading activities of the Africans in Guangzhou represent an economic ―underworld, a world that is not only untraceable by customs or survey institutes, but is also rapidly proliferating throughout the developing world.
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This paper … focuses on the informal economy in China. China’s position in the world system is ambiguous—while China is the world‘s second largest economy, it is also still a developing country; beyond this, it is relatively closed in terms of immigration policy.

Observations: Rural BoP and the cash economy

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Investment or Independence?          Photo Credit: Goverdhan Meena

Across the board, the particular characteristic that most stood out during my conversations with the rural populace in India and The Philippines, as well as prior experiences elsewhere, was their undeniable pride in their degree of self reliance, and thus, their level of independence from the formal or cash based economy.

Over and over, people would proudly point to assets like firewood, livestock, kitchen gardens etc and emphasize that these resources were “free” and didn’t need to be purchased for cash, often in the same breath pointing out how everything needed to be bought if you lived in the city. Whether it was a nanny goat kept just for milk for morning tea or an extra sack of rice held back from the harvest sales, there was a distinct sense of achievement for every penny that didn’t have to be spent.

This trait of minimizing the need for actual cash money also cropped up in other patterns of behaviour including the storage of wealth in the form of ‘kind’ or ‘goods’ (that could be liquidated if required); cashless transactions, from the simple to the sophisticated; and the rapid conversion of cash received into goods or “kind” (livestock for example).

All of these behaviours imply a challenge for businesses seeking to serve rural populations effectively since their relative lack of liquidity places them in a challenging position as future customers. While some initiatives are being put into place in order to deal with just this situation, few, if any, are currently applicable to more mainstream purveyors of consumer products and services. While one could conceivably begin to address the challenges of designing payment plans for those with irregular incomes, what happens when you add a tendency to shun liquidity to the mix?