#COVID19Chronicles-328: February 28, 2021-Lenten reflections 12-A podcast on the supportive role of the informal economy during the pandemic

Here’s a podcast based on an article I wrote last May, concerning Jamaica’s informal economy and the role it may play in a recovery from the economic recession caused by the COVID pandemic.

Does Jamaica’s economic progress (increased wealth) depend on reducing informality?

Let me go out on a limb and say that I think the PM’s views are wrong that Jamaica’s economic progress (measured by increase wealth) will be greater if informality were reduced.

Part of the current plan (developed by the preceding administration under finance minster Nigel Clarke) to rebuild the economy is to reduce informality. Associated with that is the aim to increase the number and scope of those who are in the banking system. Now, many benefits can come from this, including making it easier for the state to know who are its citizens and what they are doing. Also, in principle, citizens should benefit from being able to use the banking system to intermediate and reduce dependence on cash. Of course, for many, cash is king because of its anonymity (aka keeping things informal, or less than fully formal).

However, it’s clear that informality has been a boon for Jamaica by giving it greater economic flexibility, which has been a crucial safety valve in the context of many structural inefficiencies.

I have lots of concerns about informal activities in Jamaica, because most of them are distortions. However, removing informality doesn’t automatically remove distortions or more positively create a society that is really full of level playing fields. I have mentioned many of these before, most recently in May, but I will repeat some of them here. I have also looked at them, as have others, as part of what we see as the normality of ‘hustling’.

Squatting:

Capturing land is a bigger national sport than track and field, and has been the route for many Jamaicans to get into the ‘housing market’. Of course, ‘market’ is a misnomer because much of the property and land acquired has been obtained cost-free. If we were to remove informality (and let’s assume we do it totally, rather than gradually) we would then have to watch the real housing market deal with people who perhaps have low capital and income and may not be able to ‘buy’ their way into the market, even if we assume they all want to enter at the lowest end. New demand and supply would have to come on stream and prices will then reflect this. At the outset, it’s likely that excess demand will exist, and housing prices would rise. Simply put, Jamaica does not have enough formal housing to deal with the transfer of people from informal housing. It can be created, but I cannot say how long it would take for some combination of the State and private sector to do this.

Jobs:

We do not need to get STATIN to tell us precisely how many Jamaicans work informally; the anecdotes are extensive enough to do the main analytical job for us: vendors; labourers (urban and rural); work done for cash (which could be from odd-jobs through to professional services that are ‘off the books’—escaping the eyes of the tax authorities); small businesses that are not incorporated and may be as wide as from sole proprietorship through to several employees. (Simple case: one woman has a chicken coop to raise live chickens for sale and eggs; she employs 4 people every 2 weeks to help kill and clean chickens, eggs from a dozen layers produce one egg each a day—all for sale, and hopefully make a profit after cost of feed and ‘wages’ etc are taken into account. None of this is illegal in the sense that these are legitimate activities, but it all happens without any references to formal structures. Banks do not need to participate in financing, holding deposits or other roles. Cash is king, mainly. Money may go to banks, but it’s not related to any economic activity and is likely never going to feature in any tax assessments.) None of this is confined to individuals and corporations can participate as suits their needs and doesn’t cause any moral problems. Businesses could actually be applauded if they did socially responsible things like supporting informal businesses.

There are bigger segments of activity, eg public transport (taxi and minibus services) that can go on with high degrees of informality because our society does not insist on proper licensing of operators and all who are involved in such businesses.

Some of these same activities exist in other societies that are highly formalized and the anecdotes about ‘gardeners’ or ‘odd job men’, perhaps performed by illegal immigrants or others in marginal positions (even students or moonlighting people) can be culled from them, as well as taxi drivers who are ‘asylum seekers’ actual or not. (It’s not hard to manufacture the needed documentation to make everything seem legal and above board—much socioeconomic activity thrives on trust, not confirmation of the basis of that.) In the UK, it could be ‘Polish construction workers’, in the US, it could be the ‘Salvadorian gardnerer’ (none of these are meant to be racial or national stereotypes).

If, for some reason, we choose to formalize these activities when those involved in them are not ready, chances are the worker will not agree (eg no cheques or credit card payments; no receipts, etc.) The jobs wont get done if ‘paper work’ is involved.

Now, all of that is fine because it means that incomes are maximized in many ways. ‘Buyers’ get jobs done/goods bought/services provided for less—lower basic prices and no sales tax/VAT/GCT etc. ‘Sellers’ get tax-free incomes, which they can spend as they wish, ideally on similar informal goods and services (a win-win).

If that were to change, the basic situation is that Jamaica would have to operate on a higher cost/price basis (as all of the taxes, fees, capital costs etc. that should be incurred are recognized).

So, reduced informality tends to give greater benefits to the State, especially the Treasury (ie collector of taxes, revenues, etc.) That comes at a cost to many private operators (individuals and enterprises).

Utilities:

One important element of informality is the stealing of utility services. We have seen during the pandemic an upsurge in complaints about bills, which have pointed to the standard global practices of utilities to try to compensate for theft by loading such losses onto the accounts of those who pay. If the government is serious and comprehensive in its dealing with informality, then this is a huge elephant in the room that has to be addressed. Again, put simply, many people and businesses live beyond their means by consuming utilities services for free or far less than the going rates. If the government were to eliminate that, then it would have to either provide income for people to be able to continue consuming at previous levels or force people to consume what they can truly afford (ie recognize true poverty). Ideally, the government would see the social value of access to water and electricity and have in place a safety net to support some minimum level of consumption for every household. (The essence of this was part of the PNP election manifesto with its proposed J$3000 credit for electricity bills.)

That’s not the whole of the informality story in Jamaica. It goes too to things I know the government wants to address and we should too, such as the identification of citizens as unique and tying that identification into the delivery of government services and goods. But, that is a separate aspect of informality that is to be addressed. It’s not really necessary for the economy to function in the sense that not much really depends on each of us knowing exactly with whom we’re transacting. What we need is to know is: services/goods will be given on agreed terms; payments will be made on time and in keeping with agreed terms (in full, over time, etc, with interest, with penalties, etc); taxes and fees due to the State for these activities will be duly recorded and made properly; any legal rights of workers or providers are respected fully. (That’s how many effective and large financial markets operate.) I might have missed a few things, but I think the idea is clear. All of that could occur if we each were assigned a number and that was all we had to exchange. The national database would then connect the number to individuals. So, we could actually operate the economy on the basis of near total anonymity. If nothing ever went sour with transactions, we wouldn’t really need to know precisely whom we should try to track down for retribution; the system could be able to search for ‘xx22yy11’ and get his/her particulars to then feature in whatever ‘corrective’ or ‘restorative’ processes were involved.

Finally, the concern with informality is also largely about measurement. We have a false picture of many things because data sets only or mainly cover formal activities. That’s not trivial because policy is not going to be well framed if it understates the extent of gains and losses within the country. So, reducing informality for that reason is good, but again, its downside comes from the need to expose to the world things that happily go on ‘under cover’. If we accept that 40% of true economic activity in Jamaica is informal, it means that policy levers tend to only affect just over half of what we want to affect. That’s a huge frustration to policy makers.

I wont talk about illegal activities, and formalizing those. We have to move the moral compass a lot to bring many activities that are now illegal into the formal world because it would be legalizing them. Now, it can be done, eg prostitution is legal, has been decriminalized or abolished as a crime in many countries. But, to bring into the legal frame current crimes like lotto scamming, would push the moral envelope, because it would be near impossible for say Jamaica to legalize it so that our scammers could fleece the world—it’d be great for our budget, though. Likewise, society isn’t likely to want to bring into formality (ie legalize) a lot of violent crimes. Of course, one could posit that these changes happen, but it would be in a world most of us would not recognize or want to live in.

If none of the above is convincing, then take the view of the IMF’s MD when discussion informality and inclusive growth (my emphases):

Take the case of digitalization. It has created more opportunities for individuals to engage in informal employment to supplement their income. Think of all the people who work in the gig economy. But we may be missing gig economy employment in labor force surveys. The informal economy can provide income or a social safety net. But it is a complicated issue.”

I rest my case.

The informal economy: killing me softly with its love

I’ve often thought how many Jamaicans survive because of the informal economy. Working with little or no capital; little or no real costs; income that is not often visible to be taxed; operations without rules and regulations, etc. For many, especially those who have few marketable skills (including a good level of education), it’s the only route to survival. So, whether it’s a vendor stall, or selling steering wheel covers, or just hustling with whatever and wherever, it’s what puts bread on the table and food in the mouth for many. Without stereotyping all that is done informally, we know that such an environment has allowed those in a weak economy to do better than would otherwise be the case. So, for instance, the domestic worker who gets a few days work for cash and manages to see children through school and on to university poses a huge conundrum. Should we seek to curb her options and get her into the formal sector and all its constraints, knowing that doing so may be a hinderance to the good that her practices permit for her family?

Measuring economic activity is not just an exercise in getting things right, it’s also about making sure that policies can be directed at the best characterization of the realities of life.

Why am I thinking of this?

I’ve just made some batches of mango jam, that’s why!

One large mango tree is shedding about 20 mangoes a day and as much as I love eating them, it’s hard to keep up with that flow. Bring in the family to help eat. Still behind. Add mangoes donated. Solution? Preserve and protect. In my case, put them into a blend with water and lime juice and make jam. So, pots got boiling and I managed to make four batches, and turned out 15 jars (of different size). 

The benefit of production are that the volume of mangoes goes down dramatically: 15 jars take up barely one shelf in a fridge, while the equivalent of 4 large mangoes per jar would take up much more space.

Now, I have made the jam for fun, but friends soon got word and fun turned into gifts. Two friends have begged me to sell them some. I had not thought about becoming a mango vendor; maybe, next year.

But, my generosity has done what for Jamaica?

Well, nothing, apparently. GDP will not measure my activity at home, unless by some quirk I get caught in a household survey. My mangoes were free inputs, so no sales show up. I give away the output, so no payments are made, no revenue is generated and no income flows to me. I bought limes. I was given ginger. My use of water and gas will show up, as will the extra work of the fridge, so my utility bill will be a bit higher and STATIN may wonder about the utility consumption spike in June. Hi, guys! 🙂

Friends will send bearers to collect their gifts, so we may see some increase in GDP through service activities. I may exchange some jam for chutney, or other fruit, or some other item I want or need and someone has in abundance. Barter is alive and well. But, the big picture of all this is nowhere to be seen.

Jamaica is better off, if I can be so bold. My jam tastes good! Friends are having better breakfasts and lunches, as far as I can see.

But, our economy looks stagnant, as ever.

This scene is one that has been repeated for decades and is why Jamaica is a conundrum. Things may be booming in some clear social and economic senses, but never seen in any significant macroeconomic statistics.

The good, the bad, and the ugly (February 2, 2014)

Good

We got to hear Jamaican PM, Portia Simpson-Miller talk to the local media, and thus ‘to the people’, in a series of short video clips circulated by The Observer. But, I missed the context of her seemingly poised answers. I thought the PM was being ingenious in her positioning of the local media as being rude and that she was prepared to talk, with her comment: “They say I don’t talk to the media. If you approach me properly, I’ll talk to you. But if you are going to be pushing up the microphone in my face, or if everybody is shouting at me at the same time, no.” I don’t see the evidence that the media act this way usually, but it’s the most recent image. Good political ploy? I await some media reaction.

Bad

An American tourist was killed by a jet ski, while swimming in Negril. Needless tragedy. Whatever, ‘clamp down’ was in place was not working. A temporary ban on ski jets use has been imposed. Some, particularly hoteliers and others in tourism, have called for a total ban. Others are concerned that another area of economic livelihood is in danger, albeit because operators have been lax, but also because government action has been trailing words…again.

Ugly

Kingston & St. Andrew Corporation went on another sweep of the streets to clear them of illegal vendors, smashing up the stalls of the offending persons. Yes, measures to get vendors to sell only in designated areas have failed for years. Something cannot be right about the whole process. Brute force is the answer?

Leaving on a jet plane. Are we there, yet?

Blame me! My little daughter is becoming a good observer of people and more. We were travelling through Norman Manley International Airport (NMIA, to its friends) yesterday. Airports are great for people-watching and seeing how people just mess up things. On the messing up, NMIA has the unfortunate distinction of being better known by its often misspelled name: check the entries under Normal Manley International Airport. As good an eggcorn as I need to read.

We like NMIA, though. It’s been upgraded recently, and we were enjoying its ‘deliverables’. We enjoy it, not least because it has the best food for travellers, coming from Jamaica’s own Island GrillIsland-Grill-Logo-700x352 chain: tasty, cheap, and filling are what most travellers want, and get there. We had come straight from school and were early for our departure, so she tucked into a fish sandwich combo with mango peach drink, and I ate a chicken fricassee yabba, regular, all for less than US$10 equivalent.

We had been waiting a while before we were allowed to board. As we stood at the head of the line, we read the large poster put up by the airport authority with ’20 interesting facts about Jamaica’. Interesting yes, but facts?
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Hmm. We noted that it had been put up when Usain Bolt had only 3 Olympic medals. We wondered if updating was not part of the budget. Shame, we thought. We noted that it mentioned the Manchester Golf Club as having the ‘oldest hotel in the western world. Eh? Shamer. They mean golf course. Who did the fact checking? I pointed out to my daughter the fact about ‘it’s inhabitants’: that should be ‘its’, Daddy. (School is paying off.) Shamest.

As we prepared to board the plane to Montego Bay (MoBay), my child noticed two women standing behind us. “They’re twins…Both have the same weave. They have on matching leggings and tops,” my daughter stated, confidently. Children spot people’s physical features and clothing quickly. I pointed out that they were not wearing the same type of suede shoes: “But, they’re both wearing boots,” she retorted, quickly. We wondered why they were going to MoBay. As we moved through the first check, one of the ladies said to the other at the top of the escalator “Mek sure yu ha one foot pon di step,”; her friend was clearly stepping into new territories. The ladies proceeded to the gate, ahead of us, then made a huge fuss about the lateness of the plane’s departure. We were still ahead of time, but it seemed that we would not take off on time. A mechanic explained that the plane had come from “Up deh…an a ‘hole ‘eap a snow an’ ice deh ’bout.” The plane had needed to be washed down after being de-iced. Did the ladies want to fly with the risk of not making it? It had also been fully cleaned: “De peeple dem eat an’ leave all a dem nas’iness. You don’t want dat!” The ladies seemed mollified. As we went to the airbridge, one of the ladies was pulled over for ‘secondary screening’: welcome to air travel. We passed them, then pretended to complain, too, and raised a few smiles as we strolled onto the plane.

When we got to MoBay, the two ladies followed us from Immigration to the baggage claim carousel. A man then asked them how they knew this was the right one. They told him they didn’t know, they’d just chosen one with some people standing around. Again, clearly newbee travellers. As the bags began to roll around the belt, and were being cleared, I saw one of the ladies haul a huge cloth suitcase off, then haul off another. Higglers (vendors), I thought. If you’re not familiar with Jamaica’s street or market traders, get a funny insight by watching clips for a play.

I speculated about what they had in the bags. I presumed they were headed to MoBay to take advantage of the many visitors there this weekend for the annual jazz and blues festival, which has been running since 1996, and draws much attention from Jamaican and foreign fans. It’s an expensive event, by Jamaican standards–cheapest ticket is US$50 (and it’s to be paid in US dollars). But, that should mean some deep-pocketed potential buyers. The informal market at work on the island: where there’s a crowd, look for opportunities to sell your wares.

My wife/my mother was in Mobay for a work event and staying at one of the fancy north coast hotels. The hotel staff greeted us at the airport and arranged our ‘transfer’ to the hotel. “Have I been here, before, Daddy?” my daughter asked, as we left the airport. I told her she had, but when she was much younger. “It looks familiar,” she said as we drove on a piece of road on which she’d never travelled. The van driver told us that the city was busy because of this week’s jazz and blues festival, and that some celebrities may be staying at our hotel. My daughter was really enjoying her latest taste of good living and we joked that the driver did not realise that he had ‘celebs’ in the van with him 🙂 She took it to heart by trying out her impersonation of Jamaica’s PM, Mrs. Portia Simpson-Miller, waving her hand in regal fashion and saying “My people…”, one of the PM’s signature phrases. I cracked up: it was pretty good. She kept on saying it as we reached the hotel, and were greeted by a bellman.

It had taken us just over 4 1/2 hours to get from her school to the hotel, by plane. I told my daughter that it would have taken about the same amount of time to have driven. But, we were not exhausted from the drive, which we could do another time when we had more days to play with. “No problem with tiredness on the drive: I’d have slept,” came the nonchalant reply. Therein, lies some of the fun of travelling a lot with children. We know how to make the time pass on journeys. Well, sometimes.

Everyone’s a hustler

If Jamaica is known officially as the land of wood and water, it could also be known unofficially as ‘the land of the hustler’, or ‘the land of make it happen’. Jamaicans have rarely been criticized as lacking inventiveness. The word ‘jinal’ is really a term of praise and endearment. Any ordinary Jamaican will often say “Mi a do a likely t’ing” or “Mi a hussle…”. In other words, the person is just trying to get along, somehow.

Some of the things that one sees in Jamaica and think are haphazard actually have order and structure behind them. That order may not necessarily fit into systems of regulations that elected officials like to use. But they work and meet clear public needs. Take, for example, handcarts: you see them everywhere being pushed with anything on them from fresh produce, to iron bars, to mattresses. For people who want to do delivery work or be a vendor and cannot afford to buy or rent a vehicle, even a push bike, the cart is the way to go. Earlier this year, discussions began on regulating handcarts: the local government for Kingston and St. Andrew outlined plans to introduce a scheme to license carts and their operators, for a J$3000 fee (about US$ 30). At the time, a spokesman had claimed proudly that carts “will be colour-coded, letter-coded and number-coded”. Focus was going to be on the capital’s market districts. Those discussions have not been completed, so the carters operate without official rules.

Every now and then the authorities clamp down on vendors and handcart pushers. Last week reports of vendors–supposed to be licensed–being moved from sidewalks; many had complained that their licenses had not been renewed. The police officer in charge had told them to go to the relevant office to get the permits and say that he sent them! Speak for them, big man!

Over recent weeks, police have been seizing handcarts. The arguments in both instances are much the same: blocking busy thoroughfares, operating illegally, etc. But, these people are often caught in bureaucratic Catch 22 situations: get licensed, but license are not being issued; pay fees, but fees structure not determined. How can you expect people to change in a vacuum? What can they do to get a livelihood in the meantime? Think, people!

But, you really have to wonder if the Jamaican police force is manned by a bunch of fresh recruits from Iceland, with no notion of what many people have to do to make a living. When I saw a picture of piles on carts dumped, I had to ask whether this heavy-handed approach was the only way. Di people dem jus a hussle! Why you ha fi treat dem so? Made from scrap wood and pallets, with old tyres reworked to make wheels, and steering wheels and mechanism fashioned somehow the cart says a lot about how Jamaicans will try somehow to get a thing done. People scrambling to town on a bus or in a taxi, to try to sell a bag full of produce. Higglers taking a chance on jetting to Panama or Aruba to buy cheap items to then resell at home. Briefs, panties, hair adornments, funky electronic gadgets… Ah, but it may be about power and control. That wouldn’t be a first. Don’t let me start a rant about slavery days!

I often meet hustlers on the golf course or just on any sidewalk. Last week, I met a man walking on the golf course, he was collecting mangoes as I’ve seen on many occasions. I asked how many he usually collected each day. “If mi get two-tree, mi do arite, God bless,” he replied. We walked together a few strides and I asked how much longer he’d be able to pick, as the season’s almost over. He said maybe another week or so, because even the green mangoes had already been picked from a few trees. But, he’d pick those if he could find enough, and put them up to ripen. I too had my bag for mangoes. I like to eat them when it’s hot, as does almost everyone. He gets them for nothing and sells maybe for J$50-100. I think he needs the living. I walked on without picking more. I was hustling, too, but my need seemed less.

A well-educated professor, who was visiting recently had been lamenting how we did not seem to make good use of the regular bounty of fruit and vegetables. I mentioned that several people I’d met we’re using mangoes to make jams and chutney, in some cases to sell. We had eaten more than our fill in the few weeks we’d been here, but if I got more than we could eat or the fruit were too ripe, then I would cut them up and freeze them, for use in cooking or ice cream. My wife’s already made one batch of mango ice cream. She loves it that I can hustle. My callaloo plants, though not for sale, tell me that those who grow and sell do many of us a great service. Like the woman selling pears and candies every day at the same junction. All the newspaper vendors. All the car charger sellers.
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In a land where the informal economy is large and important–some put it at about 40-50 percent of economic activity–bringing things into formal structures shouldn’t be done with sledge hammers, bulldozers, and seizures. That’s like the jackboot mentality and it shouldn’t surprise anyone that people will protest and yell that their interests are being ignored. But, keep stripping away at that very thin fabric that has frayed but not yet torn, and manages to stop a society falling apart completely, and see what happens?

I’d really love to drive around this island and know that the reason I cannot get jelly coconuts and fruit and vegetables and new briefs as I drive around is because the license doesn’t exist or had not been renewed, especially if that can’t be done.

Who’s being foolish?