Impact of Economic Crises on Home-Based Workers

Findings of Two Studies by HomeNet Thailand

Two studies carried out by HomeNet Thailand, a network that helps organize informal home-based subcontracted and own account workers, underline the importance of organizing home-based workers and informal workers more generally. The need for a wide range of labour organizations and supportive institutions is recognized as being a concern for all workers, including both men and women, but it is found to be particularly important in the case of women working in the informal economy, given their invisibility to policymakers and the vulnerability of their position in the workforce.

The first of the two studies is entitled “Impact of the Economic Crisis on Homeworkers in Thailand” (HomeNet Thailand 2002). The research team of HomeNet Thailand was headed by Daonoi Srikajon, who worked closely with Nelien Haspels of the International Labour Organization (Bangkok Office) throughout the project. The goal of the study was to assess the impact of the Asian financial crisis on home-based workers in Thailand in the garment and artificial flower industries. These are almost entirely women workers (91 per cent of the homeworkers interviewed for this study were women) who act as subcontracted labour, working either at home or in different types of workplaces, including rural workshops, urban row houses, and other venues. The study involved the use of extensive survey techniques that covered a wide range of questions regarding the conditions the homeworkers face and the problems (and potential opportunities) created by the financial crisis.

The second study, entitled “Social Protection for Workers in the Informal Economy: A Case Study of the Garments Industry,” took a step further and examined the impact on garment workers of the crisis years as well as the longer-term economic trends in the industry in Thailand and the Philippines. The study focuses on the extent to which women and men working in casualized factory and home-based jobs in the garment industry have access to different types of social protection, or social insurance (including a consideration of what they can do when faced with illness, old age, and/or disability, among other life reversals). The study explores the extent to which the “casualization” of the labour force and related cost-cutting measures – including the use of unprotected home-based workers – has led to significant problems of gaining access to labour protection and social protection for different types of workers in both global and local value (or commodity/supply) chains. The research also addresses the problems created by manufacturers searching for ever-cheaper sources of labour and production, a trend that has exacerbated the conditions of insecurity, vulnerability, and exploitation in labour-intensive industries in the region. In this study as well, the importance of organizing informal and casualized workers stands as a significant finding for many different reasons, not the least of which is the importance of organizations (groups, networks, trade unions, and other bases for collective action) in gaining access to sources of social protection in order to deal with illness and other life reversals. Here as well, some of the circumstances that create difficulties in organizing informal and casualized workers are analyzed.

The Coming of the “Global Assembly Line”: Early Concerns and Later Developments

From the 1970s through the mid 1990s, a major concern in academic and activist contexts worldwide was the globalization of production and the intensification of exploitative conditions for workers, both within the most industrialized countries and in developing countries. These trends were perceived to be tied to the proliferation of transnational corporations; the globalization of finance and the emergence of debt crises throughout the developing world; the sudden loss of employment and job security in the most industrialized countries; the ravaging of the environment in the name of “development,” particularly in developing countries; and other related rapid and destabilizing changes that have eroded the sovereignty and stability of nations and national economies.

One aspect of this was the rise of the “global assembly line” that often “favoured” young female workers in certain developing countries, who usually worked without contracts for low pay and without benefits or job security, often under very unsafe conditions. Among other significant concerns, the internationalization of production, through the rise of “global assembly lines,” “global supermarkets” (supply chains), and other changes in agriculture, industry and finance, acted in a way that undercut the strength of national labour organizations. The labour organizations’ membership was eroded by these changes, and they found themselves increasingly stripped of their ability to negotiate and influence the enforcement of laws, including laws and regulations regarding labour protection and certain types of social protection (e.g., dealing with health care and other benefits required for formal workers under national law).

By the mid-to-late 1990s, the “casualization” of factory workers (who now were forced to work without contracts or unions) was recognized as a widespread trend, as was the trend toward outsourcing work to home-based workers not covered effectively by labour and social protection – related laws and other types of legislation. In this context of declining work conditions in both the most industrialized and developing countries, the anti-sweatshop movement grew in both academic and activist contexts throughout the world. In contrast with the earlier arguments that proposals for “free trade agreements” should be jettisoned or significantly modified, and that national economic boundaries – and consequently national labour rights – should be strengthened, the mood was now different, at least among academics and activists in the most industrialized countries. Here, the globalization of production and forcing through of free trade agreements in spite of public concerns were now seen as facts that had to be accepted and dealt with. The emphasis thus changed from how to prevent the rapid and destabilizing globalization of production and finance to how to control and counter the potentially destructive effects of these trends.

One response, based in the most industrialized countries, was to develop consumer-oriented approaches that would use purchasing power (organized economic pressure) to push for an end to exploitative conditions. A second response was to try to develop ties between labour, religious, and other types of organizations throughout the world in order to seek more political solutions to increases in the degree of exploitation, insecurity and vulnerability of working people in all country contexts. The “Northern” political and economic strategies embodied in the anti-sweatshop and ethical trade initiative-based movements, among others, have not in recent years sought to close down factories operating in the developing world, but rather have been aimed at forcing employers to provide decent wages and working conditions to those involved in production for global markets. In other words, the anti-globalization movements that would earlier have fought against the breaking of the labour movement in the advanced industrial countries (by moving factories to developing countries under very debatable circumstances) evolved into a global movement against the exploitation of working people wherever it is found. (The “Northern” and “Southern” concerns with globalization have focused on somewhat different issues, and thus the responses have also been different, but a consensus has clearly emerged on the problem of exploitation in the workplace.)

Gender, Financial Crisis, Exploitation and Job Loss in Thailand

Very serious problems associated with unregulated, speculative and exploitative conditions tied to the internationalization of agriculture and industrial production and finance arose very clearly in Thailand during the period in which the “global assembly line” and global finance emerged as important trends in the postwar world. Following this period, equally serious problems arose as the “global assembly line” began to close down in many labour-intensive industries in Thailand and move to other countries. Although very few would dispute the positive changes that have come with the economic “boom” years as investment flowed into Thailand, at the same time no one would dispute both the problems that accompanied the boom years, as well as the devastating problems that arose with the “bust,” which was symbolized most clearly in the financial crisis that began in Thailand in the summer of 1997 (and whose effects are still felt throughout the region).

At the time of the financial crisis, HomeNet Thailand was already aware of the problems faced by home-based workers and casualized factory workers that produce for global markets. In the boom years, informal as well as formal workers did benefit from new opportunities for employment, particularly in labour-intensive industries such as garments and artificial flowers. In spite of the low wages and often hazardous conditions that characterize many of these labour-intensive industries, the predominantly women homeworkers and factory workers in these industries found these jobs to be alternatives to the often more exploitative or precarious conditions faced by women working as certain types of domestic help or casual workers, or in other positions open to them at the time.

Even before the coming of the financial crisis, however, many of the workers in these industries in Thailand found that they were losing orders and even jobs as newer, cheaper sources of labour in other countries began to open up to the very mobile factories and production chains in labour-intensive industries. The “race to the bottom,” often discussed by critics of the globalization process, had already moved from a stage of job loss in the most industrialized countries to the next stage of job loss in the “higher wage and higher cost” countries of the developing world, including Thailand.

In other words, no matter how little workers were paid and how unsafe the conditions of work were in some factories and workplaces in Thailand (with the Kader toy factory fire serving as a symbol of the lack of enforcement of safety and other regulations in many factories in Thailand), by the 1990s the “low end” workers in labour-intensive jobs in Thailand were told that there were always other countries where people would work for less (and enforcement of laws would be even more lax). In fact, workers in Thailand were told by visiting officials of international development banks during the financial crisis that in order to maintain their international competitiveness, they would have to avoid “over-pricing” themselves and would need to meet those (ever-lowering) standards, along with making other changes that would make the country attractive once again to international investors, or else face a very bleak future. Thus, by the 1990s, the problems associated with the coming of the “global assembly line” were replaced by the tremendously disruptive loss of those same jobs as cost-cutting competition intensified and requirements for production and marketing changed. (The problem throughout has been the insecurity and instability caused by investment and jobs that may quickly flow in, but later – as most dramatically seen in the case of the financial crisis – can just as quickly flow out, much like a tidal wave that can leave devastation in its wake.)

HomeNet Thailand’s study of the impact of the economic crisis on home-based workers thus begins with an overview of the worsening trends in the labour-intensive industries that prevailed even before the economic crisis began in 1997. The study then goes on to discuss how home-based workers were invisible to policymakers before the financial crisis began, and then remained virtually invisible to economists and other analysts as the financial crisis began to affect the lives of workers throughout the country.

It is here that gender clearly enters the picture. The focus of analysts and policymakers at the time was almost entirely on “formal” economy workers in office and factory jobs – those working under contract, and whose losses of jobs were well-recorded in government statistics. Media coverage was also almost exclusively focused on male office and factory workers whose lives were suddenly reversed by the crisis and dramatic fall in the value of Thailand’s currency. To the extent that “informal” workers were the focus of any media attention at all, it was predominantly male construction workers who had lost jobs created during the boom years that were given media coverage.

In contrast, informal (and even formal economy) women workers were assumed to be doing relatively well, and were initially at least left out of consideration entirely. This is certainly tied to the assumption of the time that women workers generally earn “extra” income, and are not the “regular” income earners in their families in spite of the very large numbers of women working in both formal and informal employment in Thailand. In fact, economists’ models at the time assumed that the informal economy would be able to expand and absorb laid-off formal economy workers almost effortlessly. It was even asserted that the financial crisis could be a “golden opportunity” for women in Thailand since it was assumed that if their husbands or other male relatives were laid off, they would be “given the opportunity” to earn more and thus control more of the family budget, raising their position within the family and community.

This last “golden opportunity” scenario did apparently have a kernel of truth to it in certain Latin American and African contexts, in which women had not been working previously (since their working would, in some cases, signify that their husbands or other male relatives were not earning enough to support the family, and would thus be a source of shame). However, in Thailand women have long been working on a regular basis, and not just for “extra” money for their families or for their own enjoyment. In many, if not all, cases women – even in informal positions – contribute significantly to family incomes, and many are even the main breadwinners (and of course, single, widowed, and divorced women are commonly the sole providers for themselves and their children).

For these women, the financial crisis was not a “golden opportunity,” but instead had very deleterious or even devastating effects on them and their families. Many had to work (if they could find enough work) for much longer hours at much lower pay in order to maintain family incomes, particularly in the face of sharply rising costs of living and costs of production. Many homeworkers had to give up their work entirely in the face of the cancellation of job orders, and many others had to accept worsening workplace conditions, including working under hazardous circumstances that adversely affected their health and safety without the benefit of any protective measures, as that would have increased the costs of production.

The fact that it was assumed that1 these women workers were just earning “extra” money for themselves and/or their families, and2 the women working in informal types of employment would not be adversely affected by the economic crisis, contributed to their invisibility to analysts and policymakers. As “rescue packages” were developed by international and other experts to provide “social safety nets” for the affected population in Thailand, nothing was designed to meet the specific needs of different types of home-based and other informal workers, and even the programs that eventually were created that might be able to include them were, in fact, not even accessible to them during the initial years following the financial crisis.

Benefits of and Difficulties Associated with Organizing Informal Workers in Difficult Economic Times

HomeNet Thailand’s study of the impact of the economic crisis shows clearly that those who were less hurt by the financial crisis, and those who eventually had more access to social response packages and other programs, were those organized into well-functioning groups and networks. The study documents that homeworker groups that were able to maintain job orders tended to do this through their group structure and the efforts of their group leaders, who acted as subcontracting agents, using personal contacts with factories in order to maintain established -- or obtain new -- job orders. In addition, in some cases documented in the study, the groups were able to reallocate jobs within the group to ensure that those without other sources of income (e.g., through farm-related employment) would be the first to be given job orders and economic opportunities that would allow them to maintain some level of earnings. (A similar example of work-sharing is given in Case 1, below.) Networks uniting different homeworker groups also helped maintain a flow of information regarding sources of job orders or other employment opportunities, and eventually the network contacts also helped homeworkers gain access to information regarding government and other programs that could aid informal workers (e.g., through employment creation, retraining, and job skills programs, and other opportunities such as access to low-interest loans).

Case 1 - Working Arrangements Within a Group

For over seven years, the homeworkers’ group in Ban Yuwa, Sanpatong district, Chiangmai, has been engaged in subcontracted artificial flower-making. Many of them have taken this as their main source of income as it seems to pay better than working on the farm. Subcontracting used to come ten months in a year, and the group leader got contracts to produce mulberry paper through the other two months. Everybody seemed to be content working at home or with some families; however, orders for artificial flowers began declining in the past three years. It became a very difficult situation, with many orders for mulberry paper, but the orders were not sufficient.

To deal with the problem the homeworker group was divided into two groups, which members joined on a voluntary basis – one group to make artificial flowers and the other mulberry paper. With this arrangement, members are earning daily wages of between 100-200 baht, depending on their individual skills. The group has 60 members, all women aged from 16 to 50 years. The work they get is suited to their skills and capacity. Everyone seems to be satisfied with the new arrangement and the income they receive.

Source: HomeNet Thailand (2002), p. 87.

Through numerous case studies of groups as well as survey results, the research illustrates very concretely how organizations can make a significant difference in the lives of informal workers, particularly women workers and particularly in difficult times. The case studies also demonstrate very clearly the problems that arise in trying to impose a group structure on a collection of individuals who have nothing in common and no commitment to the group. The study thus argues that membership-based and member-driven organizations of informal workers will be the only ones that can maintain their effectiveness, and that outsiders cannot artificially create groups, networks, or other types of collective organizations if members do not have the means and desire to establish and run their own organizations. Such artificially created organizations are seen as “false” groupings that fall apart very quickly and do not meet the long-term needs of informal workers. The study goes into some detail about the importance of, as well as the opportunities and pitfalls regarding, the organizing of informal workers – and women workers in particular – in countries such as Thailand.

In contrast to those who successfully formed groups, networks, and other types of organizations, the research shows that individual home-based workers tended to be in a much worse position than those who were organized. The individual, dispersed homeworkers were often found to have lost their jobs altogether, and many had to leave homeworking and make due however they could. They also tended not to have adequate access to information about government-initiated and other programs that could help informal workers in both rural and urban areas of Thailand.

HomeNet Thailand’s study thus shows that organizing informal workers is important on a number of fronts – decreasing the workers’ invisibility, helping them gain access to information, influencing programs and legislation, and helping provide a wide range of services to those who usually are without a voice, and are ignored and unprotected. These roles are particularly important during an economic crisis or downturn, but for the majority of informal workers (who often comprise the largest part of the working population in developing countries) – and for women workers in particular – organizations such as trade unions, networks, and groups are crucially important even in “good times” as a means to provide a social and economic infrastructure, a unified voice, and a sense of identity and self-worth to those who otherwise might have none of these.

In some contexts, trade unions might be the appropriate form for organizations of informal workers to take. However, in some contexts other forms of organizations can work equally well, or even more effectively, and all such labour organizations can work with the established formal economy labour unions (again, with the degree of success depending on the social, political and economic circumstances of each country and historical period of time). Where labour unions are perceived negatively for whatever reason, and in contexts in which established formal economy unions have been hostile to informal workers, alternative forms of labour organizations are clearly preferable, at least until conditions change. All of these issues, and many others, are discussed extensively in the HomeNet study of the impact of the economic crisis on home-based workers in Thailand.

Benefits of and Difficulties Associated with Organizing Informal Workers in Declining Industries: Garments and Other Labour-Intensive Industries in Thailand

The second study – which focuses on social protection for home-based and casualized factory workers in global commodity chains – takes up where the first study leaves off. Recognizing that the initial concerns with the coming of the “global assembly line” have now been replaced with concerns about the loss of these jobs, the study analyses (1) the long-term trend toward a loss of jobs in the garment industry, which is a major employer of informal women workers; (2) the increasing lack of access to social insurance and social protection as one goes “down” the commodity chain to casualized and home-based workers; and (3) what might be done to deal with the deteriorating situation in the industry in countries such as Thailand and the Philippines.

It is clear that the garment industry has been in decline in both Thailand and the Philippines since at least the early-to-mid 1990s, a decline that was suddenly and dramatically worsened by the financial crisis. (The overall decline is indicated by decreasing numbers of workers employed in the industry, the decreasing value of garment exports, and other aggregate indicators; however, not all segments of this complex industry are in decline, as is explained in detail in the study. Nonetheless, we will discuss the overall decline of the industry in very general terms for present purposes, keeping in mind that the low cost/low wage side of the industry in particular is vulnerable to job loss as competitive conditions change.)

After a very brief period of relatively stable conditions, the job losses in the industry are found to be once again increasing, a trend made worse for the region by the expiration in stages of the Multi-fiber Agreement (MFA). As conditions deteriorate in these segments of the garment industry in both Thailand and the Philippines, pressure toward the emergence of exploitative conditions and the non-enforcement of labour and social protection regulations builds, and in spite of the increase in harmful conditions, job losses continue. Within this context, widespread corruption and unethical behavior may become more commonplace as cost-cutting competition intensifies, and the loss of effective negotiating power for collective bargaining agreements on the part of labour unions is a clear outcome of this process.

The study shows the extent to which these changes have affected the access (or lack of access) to different means of social protection – in the forms of health coverage, funeral expenses, and other types of insurance against sudden life reversals – of workers in different positions within global and local value chains. Here again, the study shows conclusively the importance of organizing informal workers, this time in order to gain access to local, national and other sources of social protection. Those who are part of groups, networks, unions, or other types of labour organizations (or particularly in rural areas in Thailand characterized by close community ties, the members of community-based organizations) have in almost all cases far more access to a wide range of government, private sector, and community-based schemes that help families cope with illness, old age and death, disability, asset loss, and other potentially devastating reversals and losses.

Again, in contrast to those united within groups or networks, dispersed individual informal workers are often left with very little to rely on outside of immediate family members, who themselves may be in no position to help those in need. Numerous examples are given of groups and networks that have been notably successful in gaining social protection for their members, even during difficult economic times. In contrast, other examples are given of relatively isolated individuals who, by virtue of their being migrant workers or for other reasons, have very little access to community-based programs. These individuals are found in some cases to lack even basic health coverage, and they tend to have a much smaller and less effective range of coping strategies that would allow them to deal with other unexpected reversals and disasters.

In this way, the research documents – through numerous case studies – what organizations can do (and in some cases cannot do) for informal workers in declining industries. It also points out the difficulties inherent in organizing workers whose jobs may be threatened if they join labour organizations of any type, or ask for better pay or working conditions. (See Case 2 below, regarding the relationship between “regular” factory workers – who are usually union members and work under contract – and the unprotected subcontracted workers in one company in the garment industry in Thailand.) It is argued that each set of circumstances must be confronted individually and realistically, rather than with a broad brush (or in a purely ideological way) that ignores the nuanced possibilities for organizing informal workers in an effective way.

Case 2 - Regular (Formal) and Subcontracted (Informal) Factory Workers

The formal workers in the company are currently working under these uncertain conditions [of large-scale layoffs]. Some of the workers report that they feel pressured to resign from membership in the workers’ union. The committee members of the union are faced with different factors that are weakening their position. Aside from labour conflicts (e.g., workers feeling compelled to leave the union), the future of workers in the company seems very insecure. According to them, the company has built another factory in Cambodia. It is thought – and, in fact, it is expected – that the company is planning to move its production unit out of Thailand. The regular workers also feel insecure about subcontracted workers being recruited into the factory, but after getting to know more about the subcontracted workers, the regular workers feel sorry for and sympathetic to them after learning about their poor working conditions…

As noted above, the [subcontracted] workers are required by the company not to join the workers’ union. This agreement has clearly limited the capacity to organize as a group. In addition, communication with the regular workers is not allowed at the workplace. Whenever the regular workers protest, the subcontracted workers are asked to use a separate pathway to the workplace. Nonetheless, some of the subcontracted workers have created a relationship with the company (regular workers’) union. Through the union workers, the research team was able to contact these subcontracted workers who provided their insights for this study. They are not happy with the existing working conditions and many confirmed that they want to quit this work after the six month period is over, hoping to receive back the full amount of the guarantee fund [a “deposit” of sorts that workers must pay when they begin working for the company]…

In this case, the fundamental weakness of the workers’ position can be seen in relation to the company’s failure to make the required payments into the social insurance fund, in violation of labour regulations, and so on. The workers have faced risks and vulnerabilities in various ways as discussed earlier. In this context, we need to keep in mind that the subcontracted workers as well as the regular workers are producing garments for international brands that have well-established codes of conduct [emphasis added].

Source: Doane, Ofreneo and Srikajon 2003. (2)

It is argued that as the “low end” (based almost entirely on severe cost-cutting) and even certain “middle range” forms of production move to lower wage and lower cost countries (such as China, Viet Nam, Cambodia, and certain parts of Asia, Africa and Latin America at the present time), an employment crisis is developing in the “higher cost” developing countries such as Thailand and the Philippines. The study makes a number of recommendations regarding what can be done in response to this large volume of job losses, which represents a crucial part (and often the entirety) of the family income for these women workers. The study also discusses the impact anti-sweatshop, ethical trade, and other related movements in the most industrialized countries can have on workers in developing countries, and prospects for formal and informal labour organizations working together on issues of social protection. Although the focus is on the garment industry, it is argued that similar trends are having a strong impact on most labour-intensive industries in Southeast Asia, and that the organizing of informal workers is a crucial part of the wide range of responses needed to deal with these very uneven, destabilizing, and for some communities potentially devastating changes.

The striking successes of the Self-Employed Women’s Association (SEWA) and similar organizations forcefully point out the benefits of organizing informal workers, and informal women workers in particular. If local circumstances allow, the women, their families and their communities are able to gain more control over their own lives and create more just and democratic conditions within their working and living environments. The fact that even very poor, and often illiterate, women workers can do so much for themselves and their families and communities in different parts of the world is a testimony to the power of people working together, and then of organizations working together, as the ties are extended out in networks of long-term alliances based on trust and cooperation. The two studies by HomeNet Thailand illustrate not only the problems associated with trying to create these unions and relationships, but also how much can be done – even under very difficult economic circumstances – once ties of trust and cooperation are developed, and effective ongoing organizations and networks are formed.

1 HomeNet Thailand (with the support of the International Labour Office, Bangkok Area Office and East Asia Multidisciplinary Advisory Team). January 2002. Impact of the Economic Crisis on Homeworkers in Thailand (Bangkok: HomeNet Thailand).

2  Doane, D., R. Ofreneo and D. Srikajon. “Social protection for informal workers in the garment industry in Thailand and the Philippines,” in Lund, F. and Nicholson, J. 2003. Chains of Production, Ladders of Protection. Durban: School of Development Studies, University of KwaZulu-Natal. (The study was commissioned by WIEGO (Women in Informal Employment: Globalizing and Organizing), together with the International Labour Organization (Geneva). It appeared in short form as part of a WIEGO publication, and in a longer form as an ILO-affiliated paper. The study is based on a proposal made by Francie Lund of the University of Natal, Durban, South Africa (as presented in her paper, “A Framework for the Comparative Analysis of Social Protection for Workers in the Informal Economy”). The WIEGO publication was paired with a study of informal workers’ access to social protection through an examination of global commodity chains and the horticultural industry in Chile and South Africa: Barrientos, A. and Stephanie Ware Barrientos. 2002. “Social Protection for Workers in the Informal Economy: Case Study on Horticulture.” Technical Consultative Workshop on Social Protection for Workers in the Informal Economy, held by ILO-STEP, WIEGO, and the World Bank, 11-12 April 2002.