Cost of living crisis among informal workers in Accra…policy interventions needed

Ghana’s economy is experiencing a significant challenge, as highlighted by a new report from Women in Informal Employment: Globalizing and Organizing (WIEGO). This challenge is characterized by a historic cost-of-living crisis that particularly affects those in informal employment sectors in Accra, where inflation and economic policy inadequacies have pushed nearly 850,000 Ghanaians into poverty​​.

The Scope of the Crisis

The document highlights a critical economic situation in Ghana, stating that “inflation reached a 22-year-record of 54 percent in December 2022,” which demonstrates a dramatic surge in the cost of living, affecting the affordability of goods and services for the general population​.

This inflationary spike is not an isolated phenomenon, but part of a broader economic turmoil fuelled mainly by economic mismanagement through fiscal imprudence and monetary policy failures.

Global Influences: The global economy has experienced various disruptions that have had a ripple effect on countries like Ghana. Key factors include fluctuating global oil prices, supply chain interruptions due to the COVID-19 pandemic, and geopolitical tensions, such as those arising from conflicts in key regions. These factors have led to increased costs for imports, on which Ghana heavily relies, particularly for essential items like food and medical supplies.

Local Factors: Locally, the economic scenario is exacerbated by several policy shortcomings, mismanagement of the economy, corruption, and fiscal policy failures. High levels of government debt (over-borrowing) and fiscal deficits have limited the government’s ability to invest in essential public services and infrastructure. Moreover, the closure of international capital markets to the Ghanaian government due to excess borrowing, decreased foreign exchange inflow, putting additional pressure on the Ghanaian cedi, which has depreciated significantly by over 50% between September 2022 and April 2023.

Impact on Poverty: The confluence of rising inflation and economic instability has had a profound impact on poverty levels in Ghana. The report notes that nearly 850,000 Ghanaians were pushed into poverty in 2022 due to these economic conditions. The increased cost of living, particularly in terms of food, healthcare, and housing, has made it increasingly difficult for a significant portion of the population to meet basic needs. This scenario is particularly dire for those working in the informal sector, who typically lack social safety nets and whose earnings are not stable or protected against such economic shocks.

Vulnerabilities of Specific Groups: The inflation crisis disproportionately affects vulnerable groups, including women, the elderly, and children, who are often dependent on the informal sector for their livelihoods. These groups are less likely to have savings or assets to cushion against economic shocks, making them more susceptible to immediate and severe impacts of inflation, such as food insecurity and reduced access to healthcare.

Implications at the National Level

On a national level, Ghana has suffered from a rapid increase in poverty; there has been a decline in quality primary health care; quality primary and secondary education have faced cuts in resources.

The contraction of output has also led to a collapse of small and medium enterprises, while at the same time, taxation on SMEs has increased substantially. A report released by the World Bank has revealed that high inflation rates in 2022 pushed an overwhelming 850,000 Ghanaians into poverty.

The report indicated that the severe economic crisis in 2022 characterized by soaring inflation rates had devastating consequences on food security and poverty in the country. According to the World Bank country’s “international poverty” rate was estimated at 27% in 2022, an increase of 2.2% points since 2021. Ghanaian households have been under pressure from rising prices in utilities, persistent depreciation of the local currency against all major trading currencies, high inflation, and slowing down economic activities. Poverty has been projected to worsen between 2023 and 2025, increasing to nearly 34% (international poverty line) by 2025, consistent with a muted outlook on growth in services and agriculture and rising prices which are outpacing the income growth of those at the bottom of the distribution.

Government Interventions and Their Shortcomings

Current government measures to mitigate these pressures have proven insufficient. Policies like the temporary 15 percent Cost-of-Living Allowance and a 10 percent minimum wage increase have fallen short of providing necessary relief to those in the informal sector, as they typically do not extend to these workers​.

Economic Policy Recommendations

The WIEGO report provides a comprehensive set of policy recommendations aimed at mitigating the economic hardships faced by informal workers in Accra, Ghana. These recommendations address a broad spectrum of needs, from direct financial support to structural changes in the recognition and support of informal workspaces.

Direct Support Measures:

• Cash Grant Programs: The expansion of cash grant programs is proposed to provide immediate relief to informal workers struggling with the high cost of living. These grants can help cover basic needs such as food, rent, and utilities, providing a lifeline during economic downturns.
• Low-interest Loans: Additionally, the provision of low-interest loans tailored for informal workers can facilitate the acquisition of necessary supplies or the expansion of small-scale businesses. This financial support should be accessible and designed to meet the unique conditions of informal employment, where traditional collateral may not be available.

Legal and Workplace Recognition:

• Regulatory Framework: Establishing a robust regulatory framework is crucial for legitimizing informal workspaces. This framework should recognize these spaces as legitimate sites of business, affording them legal protections and rights similar to those enjoyed by formal sectors.
• Market Infrastructure Improvements: Upgrading market infrastructure to provide a safer, more organized environment can significantly improve the daily operations of informal workers. Improvements might include proper stalls, sanitation facilities, and secure storage areas, which not only enhance the working conditions but also potentially increase worker productivity and income.

Health and Safety Investments:

• Accessible Healthcare: The establishment of accessible and affordable healthcare options for informal workers is vital. Many informal workers lack health insurance and are vulnerable to health crises, which can devastate their financial stability. Community health posts or mobile clinics could serve as practical solutions within these communities.
• Workplace Conditions: Enhancing workplace conditions, particularly in highly hazardous areas like landfills, is necessary. Installing proper sanitation facilities and ensuring regular maintenance can prevent health issues and improve the overall safety and efficiency of these workspaces.

Educational Support Initiatives:

• Scholarships and Funding: Offering scholarships and educational funding for the children of informal workers is a forward-thinking approach to breaking the cycle of poverty. Education provides the next generation with tools for better employment opportunities and the potential to transition into formal sectors.
• Support for Adult Education: Additionally, providing adult education and training programs can help current workers upgrade their skills or transition to more stable employment, thus fostering economic resilience.

Comprehensive Implementation:

• Partnerships for Execution: Effective implementation of these policies requires collaboration between government agencies, non-governmental organizations, and community leaders. This collaborative approach ensures that the interventions are well-suited to the specific needs of the informal workforce.
• Monitoring and Evaluation: Establishing mechanisms for monitoring and evaluating the impact of these policies is crucial. Regular assessment helps in tweaking and improving policies to ensure they effectively address the needs of informal workers and contribute to sustainable economic development.

Conclusion

The plight of informal workers in Accra illustrates a broader global issue where those in informal employment are often marginalized in economic and social policies. By adopting comprehensive, inclusive, and proactive policies, Ghana can protect the livelihoods of its most vulnerable workers and set an example for other nations with similar economic structures.