The Ethiopia Jobs Compact is about to come into its own. Funded by the U.K., the European Investment Bank and the World Bank, it initially promised to put 30,000 of the country’s Eritrean, Somali, Sudanese and South Sudanese refugees in new jobs in export manufacturing zones, while creating another 70,000 such positions for Ethiopians. Announced in 2016, it was overshadowed at the time by the much larger Jordan Compact, through which the World Bank, the European Union and various European governments agreed with the Jordanian government to create jobs for hundreds of thousands of Syrians, principally in Jordanian garment export factories.
The Ethiopia agreement’s implementation was delayed until the Ethiopian Parliament passed an amendment to its refugee law last month. The time lag, a source of frustration while it lasted, now seems like an advantage. It gives the Ethiopian government and its international partners the chance to learn from what happened in Jordan.
One key lesson has already been absorbed: As currently configured, the garment export industry is a poor match with the needs of refugee workers, whether in Jordan or Ethiopia. The Jordan Compact’s promise to place 150,000 Syrian refugees in garment manufacturing jobs in export manufacturing zones remains unfulfilled. Today, just a few thousand Syrians hold such jobs. With this in mind, the World Bank surveyed refugees in Ethiopia about what kinds of work they would be interested in doing. It found little interest in garment manufacturing, particularly because of the very low wages in the industry. On the other side of the equation, interviews with garment employers in Ethiopia revealed a preference for unmarried, childless young women with an 8th–10th grade education – a poor fit for refugee demographics.
In recognition of these challenges, the Ethiopia Compact was renegotiated in 2018 to focus on formal economic opportunities not necessarily linked to the export manufacturing zones in which garment jobs are typically based. But the commitment to formality ignores the likelihood that many refugees will be able to find only informal work.
The Jordan compact offers a warning here. Despite its focus on supposedly formal garment employment, most of the 50,000 Syrians who have received permits continue to work in construction, agriculture and other largely informal sectors where they labored without permission before the compact. It is unclear whether or how much permits have changed the conditions under which they work.
The informal economy, therefore, has become an elephant in the room in the Ethiopian context.
To begin, it is not clear what the renegotiated Ethiopia compact means by “formal” opportunities. The International Labor Organization (ILO) defines workers as informal when they do not have “secure employment contracts, workers’ benefits, social protection or workers’ representation.” By this understanding, many ostensibly formal jobs in Ethiopia, including the garment positions originally designated as the ideal formal opportunities for refugees, are actually informal in many regards. In reality, the formal and informal economies lie along a continuum rather than being separated by a clear line.
It will be very difficult to deliver on a commitment to provide exclusively formal economic opportunities for refugees in Ethiopia. Although the Ethiopian government is committed to export-oriented industrialization as a development strategy, much of the country’s economy remains agricultural or otherwise informal. Refugees in Ethiopia largely live in camps in rural border regions close to their home countries, where rates of informality are even higher. Many already work informally in local towns and markets. It is likely that a number of refugees granted work permits through the compact process in Ethiopia will end up (or continue) doing work at the informal end of the spectrum.
Given this reality, compact implementation efforts will be more effective if they focus on advancing decent work for refugees and the host-region Ethiopians who will work alongside them, wherever those opportunities lie on the formal-informal spectrum.
Such a move flies in the face of development orthodoxy, which sees formalization as the only road to economic advancement. But the reality on the ground is telling us otherwise. Far from disappearing as capitalism advances, informal work has grown in many places, responding to the pressure for low-cost labor in the global economy. The informal economy feeds global supply chains in sectors from garment to recycling to logistics. Furthermore, each informal sector operates according to its own economic logic, depending on its location and the industry of which it is a part. There is no one-size-fits-all formalizing intervention.
Instead, formality should be a long-term goal, pursued in context-dependent ways. In the interim, the focus should be on improving the quality of work all along the continuum. The ILO recommends that labor inspectors work hand in hand with workers and their organizations to increase the safety and stability of informal jobs. Informal workers and their associations, in consultation with governments, have designed policies that improve the quality of informal workers’ lives and increase their income while recognizing the need for steady, incremental reform that avoids the destruction of existing livelihoods in the process. Trade unions have allied with these associations to advance labor standards for all.
The implementation of the Ethiopia compact can and should incorporate these approaches to making informal work better for those who do it, be they refugees or natives. This will not be easy. Ethiopia has had a hostile climate for NGOs and independent trade unions for years. Its Ministry of Labor is seriously underfunded. But Prime Minister Abiy Ahmed, elected last year, has promised to open up its civil society. And the compact itself comes with funding and support for effective labor enforcement.
Ethiopia now has the chance to teach the world how to build decent work into the core of a refugee livelihoods program.
The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Refugees Deeply.