PARTICIPATING IN THE INFORMAL SECTOR: To be or not to be?

 

Introduction

The concept of informal sector first appeared in the early 70’s with the launch of the World Employment Programme by the International Labour Office (ILO) and its classic Kenya Report (Hart, 1973). Emphasis is given to the dualism approach in describing the sector (Boeke, 1953:98). The sector is characterised as the traditional vs. modern or informal vs. formal or the lower vs. upper circuit, all of which pointed out that the world economy can be divided into two distinctive and opposite sectors. The basis of this approach follows the dependency’s line of thought in which the economy is divided into two parts, the rich and the poor, the superior and the inferior, as well as the dominant and the dependent. It is believed that the coexistence of this division is chronic and not merely transitional. More importantly, it is permanent, growing and increasing the gap between the have and the have not.

Hawking and other informal sector activities are posed as antithesis of capitalist economic activities or a drag on economic development (Armstrong and McGee, 1987:106). However, the activities of the informal sector are productive endevours that serve to alleviate poverty when employment opportunities are limited. The development and persistence of such activities are seen as a result of unemployment and underdevelopment that they are regarded as a temporary or transitional phenomenon. Sethuraman (1981:63) for example, suggested that the informal sector is only a holding ground for the rural migrants before finding wage employment elsewhere. In fact, the economists define the informal sector activities as disguised employment since they are low productivity, low paid activities that serve to reproduce labour force.

Along the same line of thought, Mazumdar (1976: 55), iterated that since the informal sector is closely associated with the rural to urban (migration) phenomenon, the involvement of migrants in this sector is practically due to their failure of finding suitable job in the other sectors. By the same token, Todaro (1969) also recognised a clear connection between the migration and employment opportunities since its pattern is a function of differentials between income expected from the migration and rural subsistence income. However, the existence of the informal sector has reduced the probability of migrants finding jobs in the formal sectors, which shows its success in absorbing migrant workers.

Recognising the importance of the sector in providing job opportunities for the lower income groups (and migrants), many Marginalist theorists (See for instance Quijano-Obregon, 1974) sees the informal sector as a marginal activity at the peripheral of the formal sector which acts as a distinct marginal pole for the industrial reserve army which produces cheap and poor quality subsistence goods. Participants of the informal sector are considered as a potential source of workers to supplement the other sectors.

Many people choose (petty) trading as an occupation because of its simplicity. Entry into trading is relatively easy considering little capital and skill requirements are needed. It is a unique activity since it allows operation at any level of the (economic) continuum without fixing any lower limit for investments. Despite this easiness, studies in various parts of the world (Smart 1989, McGee 1970 and Dasgupta 1992) had established that hawkers (or petty traders) are mainly poor and marginalised people who are trying to eke a living with most of them trapped in this activity out of desperation to survive. In Singapore and Hong Kong (Grice, 1989:105) for instance, it has been shown that people ventured into hawking by their own choice and not because of lack of opportunities for employment. Obtaining higher income, gaining personal autonomy and achieving greater social and economic mobility were among the reasons given for choosing hawking as an occupation.

This paper focuses on a study on night market hawkers in Penang in which data was collected through the utilisation of a questionnaire and interviews. Based on a sample of 154 hawkers, the findings have shown that they entered this occupation for various economic and social reasons.

Hawking in Malaysia: An Overview

Petty trading is a major part of the informal sector activities that employ the majority of people in the developing countries. In Malaysia, this activity is recognised by the society and authorities although at times it is regarded as a social problem since traders normally clutter up streets, create congestion and unhygienic. In comparison to the pre-independence era, hawkers today are provided with improved facilities to enable them to participate in the economy. New and improved stalls, complexes and trading sites are built to boost their operation. An integrated trading system was also introduced to alleviate some of the economic and social problems relating to such activities.

Petty trading is divided into distinct categories to implicate their relative distribution functions.

  1. Public and private market place

  2. Stall Complexes

  3. Static stalls on private land, public roads or sidelanes

  4. Temporary hawker pitches

  5. Night/Day markets

  6. Farmers’ markets

  7. Festive and seasonal stalls

Prior to 1969, local authorities applied restrictive policies by limiting the issue of licenses, hawkers in particular, restraining their activities specific locations and imposing heavy fines if they offended these regulations. . At this time, no attempts were made to relocate hawkers into complexes to widen the scope of petty trading activities. However, following the incidents of racial tension in 1969, the government realised that policies to expand employment opportunities had to be adopted for all people, but particularly the Malays, who had been disadvantaged by the colonial pattern of development (McGee and Yeung, 1977.). The New Economic Policy under the 2nd Malaysia Plan outlined several policies reflecting to the development of entrepreneurial activities with two-prong objectives of raising general income levels and restructuring Malaysian society to correct economic imbalances. This resulted in a more liberal licensing procedure, the promotion of the legal framework through education, the provision of loans and facilities development.

The Night Market System

The emergence of night (and day) markets, popularly known as pasar malam has shaped patterns of consumption as well as the structure of the distribution system for local consumer commodities. In the state of Penang alone there are currently 86 night markets which are registered with the local authorities. These night markets are either managed by the respective local authorities or by sponsors which include community associations, political parties, local hawker associations and individuals.

Night market trading is defined as one of the hawking activities although in fact it is semi-static or periodic in nature. It is distinct from other petty trading activities in terms of the types of commodities sold and time of operation. The markets carry a wide range of consumer commodities from food to non-food items and operate once or twice a week in different locations. Other types of petty trading are limited to the sale of cooked and perishable foodstuffs and are operated on daily basis.

Night markets are located in three main areas namely, urban, rural and housing estates in both areas. It has been identified that the most frequent sites to be used as night market places are local/public roads, public playing fields, parking lots and other specially approved areas. The utilisation of such spaces has substantial implications not only for the planning system but also for the overall distribution system for local consumer items. For instance, The MPSP has clearly stated in Policy 6 of the Commercial Section in its Structure Plan Draft (1985,8-8) that,

" Allocation ( of funds and efforts ) will be created to plan for organised and proper hawker areas and stalls in commercial centres and housing estates.

Stall and hawker sites can be divided into three types which are;

                                                        i) Static -provide water and electricity facilities

                                                        ii) Temporary - provide sites

                                                        iii) Periodic - provide sites for certain period of time during the day or night ."

 

The importance of night market network as a retailing distribution system is emphasised by the authorities through the approval of its sites.

The Case Study

It is the intention of this study to examine the extent to which night market hawking has assisted lower income people to expand their employment opportunities, accumulate capital, allowed upward mobility and integration into the urban economy. For this purpose, it is essential to examine variables that are related to the overall conceptual framework of this activity. This study employed both a survey and participant observation methods. The survey focused on collecting data pertaining to hawkers and their businesses while the observation method collected information that could not be covered by the questionnaire such as the physical setting of the night market site or the organisation of day to day marketing.

The population for the survey was made up of all hawkers at any night market that was registered with respective local authorities. Since the study concentrates on Penang, all night market hawkers were considered as the population for the study. A stratified sample of the hawkers according to the types of goods sold was used as a representative of this population. The primary and secondary data collected were processed using a statistical package to acquire results which were analysed by applying univariate and bivariate analysis.

As a result, a total of 154 hawkers from 23 night market sites were selected. Although the main focus of the study was to examine the growth pattern of night market activities; their reasons for entering the occupation have also shown some important findings that can be associated with the pattern.

Reasons For Entering

In many cities in the Southeast Asian region, hawkers are commonly portrayed as unskilled, poorly educated people forced into the marginal occupation. Hawking is also seen to be a temporary measure of survival whilst awaiting better opportunities in other economic sectors.

Some perceive hawkers as part - timers who hold one permanent occupation during the day and trade at night to earn an extra income. An extension of this stereotype is that they are assumed to be part of "reasonably rich" group of people who are reaping a substantial amount of income through profits from their trading activities. McGee and Yeung (1977, pp. 81), in describing various attitudes towards hawkers, pointed out that at the extreme, hawkers are portrayed as shrewd entrepreneurs who have more financial resources than they appear to have.

Many reasons are associated with the entrants into the informal sector. The reasoning behind the encouragement given by the government towards the informal sector is mainly economically motivated. By opening up opportunities to hawkers, the authorities emphasise the need to balance out the economic situation especially amongst different races. Along the same line of reasoning, they also see that the informal sector is a potential platform to create or develop entrepreneurship especially among the lower income groups.

As for the hawkers, entry into this sector is related to both social and economic reasons. Reasons for entry, however, need to be related to the characteristics of the hawkers. Many hawker studies (Dasgupta 1992, Lam 1981, Bromley 1978 and McGee and Yeung 1977) have shown that street hawkers in their respective locations were mainly new migrants to the cities who were forced into hawking due to their limited resources. The night market hawkers, however, are non-migrants. The majority of the hawkers were born in Penang or in the neighbouring state of Kedah. The remainder came from the states such as Perak, Kelantan and Negeri Sembilan. Almost all of the Penang born hawkers were currently residing there and the hawkers from Kedah and Perak were from cities and towns that were in close proximity to Penang. Hence, the night market hawkers were not really "outsiders" to the sites but more of a localised trading community.

Table 1.0 Birthplace by State of Current Residence of Hawkers

BirthPlace

Current Residence

 

Penang

Kedah

Perak

Row Total

Penang

102

6

-

108

 

94.4

5.6

-

70.1

Kedah

8

22

-

30

 

26.7

73.3

 

19.5

Perak

5

1

3

9

 

55.6

11.1

33.3

5.8

Kelantan

-

1

-

1

 

-

100

-

0.6

N.Sembilan

2

1

-

3

 

66.7

33.3

-

1.9

Others

2

1

-

3

 

66.7

33.3

-

1.9

         

Total

119

32

3

154

 

77.3

20.8

1.9

100

Overall, these findings substantiated two important aspects of the night market hawkers. First, the majority of the hawkers are local residents who were born in and/or had lived in Penang for a long period of time. They were not migrants. Second, even the hawkers who had migrated to Penang, had already lived there for a relatively long period of time. Unlike the street traders of Calcutta (Dasgupta, 1992), or Hong Kong (Smart, 1989.) or Jakarta and Baguio (McGee and Yeung, 1977), the night market hawkers are, in the main local residents who treat the profession as a permanent way to make a living.

A number of previous hawker studies (Dasgupta 1992 and Smart 1989) have shown that education levels were generally low and that the majority of hawkers had no formal schooling. However, studies completed by Grice (1989) in Singapore and by Lam (1981) in Kuala Lumpur and Malacca, Malaysia, have both shown that the majority of the street hawkers had at least completed primary education. This study produced different findings. As shown, almost half of the hawkers had completed junior secondary school while about 27% have had primary school education. As expected this shows that younger hawkers were more likely to be better educated than the older group. Generally, although night market hawkers came from lower educational backgrounds, they are by no means the worst educated groups.

Table 1.1 Education Level (%) and Average Age of Hawkers

Education Level

%

Average Age

No Formal Education

8.5

38

Primary School

26.8

43

Junior Secondary

50.4

34

Senior secondary

13.0

32

University

1.3

31

Other researchers especially Lam (1981), have pointed out the importance of family and household information in relation to the hawkers’ involvement in the profession. Although on average, the night market hawkers have a typical household size, it is worth noting that the majority of them have more than 5 dependents to support.

Table 1.2 Number of Dependents in the Hawkers’ Household

Dependents

Number of Hawkers

%

1 to 2

28

18.2

3 to 4

52

33.8

More than 5

55

35.7

None

19

12.3

     

Total

154

100

When this information is related to the average age of children in the household (which is 8), it is more likely that the hawkers have a young family to support. Supporting the needs of a young family may appear to require a relatively assured income from an established occupation.

The reasons for entering the hawking profession can be divided into two headings namely, the negative, and positive. It was found that the hawkers had entered hawking mostly for positive reasons such as "good possibilities for earning income". By the same token, Lam (1981) also found that hawkers in three Malaysian cities of Kuala Lumpur, Malacca and Petaling Jaya had mostly engaged in hawking for positive reasons. However, McGee and Yeung (1977) found that although generally the older residents had entered this profession for positive reasons the more recent ones cited negative reasons such as "no job", "no skill" and "no capital". As shown, the majority of the night market hawkers interviewed for this study entered the profession for positive reasons. The main reason cited is income related, that is, either to obtain primary or supplementary income. The next largest group stated that their desire to set up some kind of business had led them into hawking. "Easy to operate", "inheritance from family" and the "desire to be independent" are the other less featured reasons for entering. The negative reasons such as "no education", "no capital" and "age limitation" seem to be relatively unimportant. When these reasons are related to the length of residence of the hawkers, two distinct groups emerged. The majority of the more recent residents (less than 6 years), indicated their interest in developing a business as the main reason for entering while the older ones emphasised the income factor.

Table 1.4 Reasons for Entry by Length of Residence (%)

Reasons

Length of Residence (years)

 

<6

6-15

>15

Native

Row Total

Positive        

98.0

Income

27.02

50.0

68.3

52.9

52.7

Interest in business

62.2

28.6

15.9

5.9

25.7

Easy operation

2.7

21.4

11.1

17.6

11.5

Family inheritance

5.4

-

-

14.7

4.7

Be Independent

2.7

-

3.2

5.9

3.4

           
Negative        

2.0

No education

2.7

-

-

-

0.7

Age Limitation

-

-

2.7

-

0.7

No Capital

-

-

-

2.7

0.7

           

Column Total

25.0

9.5

42.6

23.0

100

This part of the analysis provides several important indicators about the viability of the profession. First, the fact that the more recent residents have entered night market hawking mainly because of their interest in business shows its potential as a training ground for entrepreneurial development. Such a finding appeared to provide support for the government’s policy in encouraging more people to be involved in trading activities since these hawkers can be considered as readily available resources for the implementation of such a policy. Second, the older residents who considered the profession as a source of income for their livelihood, indicated the potential for growth of such activities. Furthermore, it showed that the night market hawking is not a refuge profession (Grice 1989, pp. 34) for those who are unemployed or those who lacked necessary qualifications to move forward in their lives; rather it is a viable basis for a more secure livelihood.

Implication

A popular view shows that the informal sector act as a training ground for people before finding a more suitable job in the formal sectors (Sethuraman, 1981). Grice (1989) called it a refuge occupation. Many scholars also regarded the informal sector as the industrial reserve army in which the participants were considered as reserved workers for the formal sectors where they will remain in the informal sectors so long as the formal sectors manage to absorb them. However, the night market hawkers do not treat their occupations as a temporary measure. Many are engaged in night market hawking because of the income opportunities and their interests in business activities. Therefore, these hawkers are not forced into hawking instead, they choose this occupation because of the pulling factors that it can offer.

Another characteristic of the night market hawkers as compared to other street traders is that the majority of them are localised people instead of migrants. Since migration and the informal sector can be considered as a synonym, studies showed that occupations such as street trading were closely related to rural migrants who were forced into the sector because of life struggle and hardships. Since the night market hawkers are locals, their requirements, conditions and characteristics are different from the migrants. Perhaps this position has attracted many external parties to be involved in night markets. The government is called for to assist this sector in order to fulfil not only their political constituency but also their responsibility towards the locals. The involvement of the locals helps the government in creating jobs as well as reducing unemployment. By being a labour intensive activity, hawking manage to ease pressure for the government to solve employment problems so that the state can leave the sector to take care of itself while it can set on other priorities. Furthermore, such an involvement would also benefit the local economy by limiting the flow of capitals outside the state because of an increase in local consumption patterns. From the perspective of the intervention, the involvement of the locals will boost the image of the government as a strong supporter of the low income because of the opportunities given to them to trade at night markets.

Conclusion

The night market hawkers develop a pattern of involvement that is quite different from the traditional informal sector perspective. The characteristics of the hawkers determine their involvement in the activity. The fact that they are not migrants with a relatively young family to support, it is quite natural to cite income-related reasons as the main determinant of involvement. They are not forced into hawking. Supportive government interventions have also contributed to the livelihood of this sector. Thus, hawking seems to provide an income generating activity and a viable choice to wage employment. Participation in this occupation is therefore by choice.

Reference

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