Reevaluating the Grey Economy for Refugees

Reevaluating the Grey Economy for Refugees

As the Syrian refugee crisis enters its seventh year, the discussion on Syrian refugee livelihoods has shifted focus. The crisis is now characterized as protracted, and host states are taking measures to include refugees in the labor market. However, in our rush to increase the participation of refugees in the formal labor market, we must not overlook the fact that many are already gainfully employed. The routes to—and advantages of—formalization are complex, and must be evaluated carefully against other labor market goals.

Based on the number of work permits issued, around 45,000 Syrian refugees are formally employed in Jordan. But this figure rises steeply if those working unofficially are included.

While this is problematic for a variety of reasons, such as the lack of official worker rights, no set minimum wage, and vulnerability to exploitation, informality is a feature of the Jordanian economy that long pre-dates the Syria crisis. In fact, both the Jordanian and pre-conflict Syrian labor markets exhibited high rates of informality.

Efforts to bring Syrians out of the informal sector are futile if they do not target the overall system that has created the informal economy, which makes up 44 percent of Jordan’s labor force. As long as Jordanians continue to work in the informal sector, so will Syrians.

A recent roundtable discussion on the issue, which was organized by the WANA Institute and the UNHCR, brought together experts on displacement from across the region.

One participant said the official aversion to the informal economy isn’t necessarily beneficial from a perspective of improving refugee welfare. How so? Well, the more disadvantaged people in the region are more likely to be working in the informal sector. Jordan is no different. Rather than dismissing the informal labor market based on its disadvantages, it may be better to accept its existence and the safety nets it provides, at least in the short-term. If we want to reduce aid dependency, without undermining the domestic economy, it might be more expedient to work alongside the informal sector rather than against it.

It’s important to note that the availability of work permits for Syrians hasn’t necessarily improved their wellbeing. Sectors with particularly high levels of Syrian employment are agriculture and construction. Very few work permits have been issued in the construction sector, which is likely due to the very insecure nature of the work.

More Syrians are working officially in the agricultural sector. It was the sector with the highest allowance of foreign labor, as well as the cheapest work permit to acquire until a recent decision to unify all work permit fees, regardless of the sector. However, an estimated 70 percent of total workers with agricultural sector permits, are actually working in other sectors.

Due to the seasonal nature of agricultural work, worker rights in this sector are difficult to assess and inspect, leaving workers vulnerable to exploitation, including a high incidence of child labor and sponsors demanding commissions to apply for employee work permits. Moreover, incentives for a sponsor to acquire such work permits on behalf of employees who then employs them in other sectors, or with other employers, are high.

Vulnerability should also be taken into consideration when weighing up different policy choices. A common concern among refugees is that being bound to one sponsor for an extended period restricts their freedom to move from one employer to another.

Some refugees also reference their inability to work multiple jobs, which, in the case of temporary or daily work, is essential to make a sustainable living. This makes the informal economy more appealing to some.

The formalization of employment is in many ways essential to the economic development of any country. However, context matters. It’s important to validate the employment of those who are not on stable contracts as their welfare is still considerably better compared to those who are not employed at all.

This could also be viewed as a means of integration into the local economy. Jordan’s economy relies heavily on informality, and Syrians are successfully integrating themselves into the informal sector and becoming more self-sufficient. Surely this is a good thing?

Shaddin Alhajahmad is an economic researcher at the WANA Institute, working on refugee empowerment through strengthening access to labour markets.