1 Introduction

The coronavirus disease (COVID-19) pandemic is a multifaceted crisis that has affected various aspects of society, i.e. public health, social, economic, and political realms (Anazonwu et al. 2021). Besides its multisectoral impacts, researchers have posited that this pandemic has disproportionately impacted the most socially and economically vulnerable groups (Braam et al. 2021), particularly those engaged in the informal economy (ILO 2020). The informal economy encompasses any economic activities involving workers and economic units that are not covered or insufficiently covered by formal arrangements (ILO 2015). The International Labour Organization (ILO) report indicates that approximately 2 billion informal workers and business owners lost their jobs during the pandemic (ILO 2020). The COVID-19 pandemic significantly impacted more than 76% of informal economies in the world, the majority in developing countries. Scholars highlighted that the COVID-19 pandemic hit the informal economy by losing customers, causing revenue declines, and even business closures (Helgeson et al. 2022).

Numerous studies have recorded various impacts of previous financial crises (i.e. the Asian Financial Crisis of 1997–98 and the Great Recession of 2008–09) on the informal economy (Mehrotra 2009; Jaskova 2017; Kahlayar et al. 2020; Blanton & Peksen 2021). Academics subsequently debated whether the informal economy could be resilient and act as a safety net during the crisis or potentially exacerbate the repercussions (Pitoyo et al. 2020). Still, in the context of the COVID-19 pandemic-induced crisis, limited studies have attempted to elucidate the resilience of the informal economy.

It is important to note that resilience is relatively defined in relation to the stressor or shock that a system experiences (Carpenter et al. 2005; Pike et al. 2010; Davoudi et al. 2012). Resilience is not a single static system but a dynamic system that involves the ability to adsorb, adapt and restore after a disaster (Proag 2014). It may be altered by time and the environment in which the system or part of the system is experienced. Those who demonstrated resilience during previous crises may not necessarily exhibit the same level of resilience in subsequent crises with distinct causes and characteristics in causing disruptions (Pitoyo et al. 2020). Therefore, it is imperative to comprehend resilience in a context-specific manner.

Currently, scholars perceive the informal economy as a vulnerable group and become a burden on development. It is a byproduct of poverty (La Porta & Shleifer 2014). On the other hand, it is important to note that the concept of vulnerability and resilience remains subject to ongoing debate as they are both products of social construction (Bolin & Kurtz 2018; Endress 2015). A group's vulnerability and resilience characteristics could be expressed simultaneously (Usamah et al. 2014). Therefore, it is crucial to recognise and consider both the vulnerability and resilience aspects of an entity when examining its response to a disruption. This understanding is essential in comprehending how the entity sustains its existence following a disruption, even in situation where it may encounter total loss.

This paper aims to present key debates about the concept of resilience brought into the context of pandemic and informality, especially from a socioeconomic perspective. We approach resilience by understanding impacts and coping mechanisms synthesised from previous studies. This work, in hope, can contribute to academics' discussion on informal economy  strategies in responding to crises and provoke scholars to challenge the concept of informal economy resilience with empirical studies. Furthermore, the characterisation of the informal economy, specifically its resilience, holds significance in developing better policies for managing the informal economy, an aspect often neglected in urban and economic development (Sassen 1994; Sultana et al. 2022).

This study is significant due to the predominant role of the informal economy in developing countries economic structure. If developing countries can demonstrate their ability to implement strategies that strengthen and sustain the informal economy during the pandemic, it will present a significant prospect for the organisation of their informal economic endeavours. This study may be limited to the selected cases, but it is hoped to provoke further understanding of resilience and its relevance to multisectoral disaster management.

2 Conceptualising the Resilience of the Informal Economy

Resilience has become a central terminology in various disciplines, particularly social sciences, medicine, engineering, environmental sciences, and psychology (Mayar et al. 2022). Consequently, there is no agreed definition of resilience. However, some classical resilience concepts have attracted the most attention and have become the foundation in theory development, i.e., ecological and engineering perspectives (Holling 1973). Engineering resilience views that equilibrium in a system will always be achieved again after being altered by disturbances. Ecological resilience has similar assumptions to engineering resilience regarding path dependence, but it emphasises the idea of multiple equilibria. In subsequent evolutions, contrary to the equilibrium assumption, the adaptive approach focuses on the ability of the system to change, adapt, and transform in response to strains and stresses, and the system itself is complex, dynamic, self-organising, unpredictable, and can change at any time (Carpenter et al. 2005; Pike et al. 2010; Davoudi et al. 2012).

Concerning resilience studies, understanding community resilience is a prerequisite for sustainable development. However, resilience is not simply reflecting the effects of quantified variables as other qualitative factors influence the difference in resilience building among groups (Béné et al. 2016). For example, social cohesion influences society's ability to transform livelihood, institutional structure influences the transformative capacities of society, and governance leadership determines the community's capacity to adapt to change (Coulthard 2011; Pelling & Manuel-Navarrete 2011; Schwarz et al. 2011). Furthermore, Béné et al. (2016) found that wealth is an essential factor in the recovery process of a household affected by a disaster.

The concept of resilience has also been explicitly discussed from macroeconomic and labour market perspectives (Bigos et al. 2013; Hijzen et al. 2017; Simões et al. 2022). In the context of economic activities, it has been known that there are different characteristics between formal and informal economies, possibly reflecting their ability to adapt to changes. The latter economic activity is a major concern in assessing labour market resilience due to multiple vulnerability determinants (Brata 2010; Rothenberg et al. 2016; Garzón-Duque et al. 2017). It is imperative to mention that not all those involved in the informal economy are poor, but it is recognised that there is a positive association between informality and poverty (ILO 2018). Given this fact, the transition of workers and economic units from the informal economy to the formal economy has become one of the strategic approaches to building resilience (ILO 2017).

Despite the general view that people working in the informal economy are vulnerable, they can respond to ongoing socio-political and economic challenges. For example, informal sector workers in Ghana have successfully designed savings strategies and free-interest loans even though they face barriers to access to formal financial institutions (Danso-Wiredu 2021). Furthermore, Armansyah and Sukamdi (2021) reveal that informal entrepreneurs could improve their businesses despite the lack of government intervention. In addition, several studies have uncovered and identified coping strategies employed by informal workers using a sustainable livelihood framework (Mago 2018; Chamaratana et al. 2018; Foster et al. 2021; Malak et al. 2022). Indeed, the informal economy may contribute positively to local economic growth, improve living standards, and play a crucial role in socioeconomic development on a broader scale (Addai 2011; Agyei et al. 2016; Thulare et al. 2021).

The resilience of the informal economy is increasingly being tested when dealing with economic upheaval. Pitoyo et al. (2020) argue that there are optimistic and pessimistic views regarding the ability of the informal economy to survive amid a crisis. The optimistic view states that flexibility and employment absorptive capacity is key to the informal economy's resilience. In contrast, the pessimistic view assumes that the crisis increases vulnerability, especially without adequate social security. Still, little evidence suggests the resilience of the informal economy during the economic crisis induced by the pandemic (Pitoyo et al. 2020).

In this study, we will focus on the socioeconomic resilience of the informal economy. In our context, the concept of socioeconomic resilience pertains to the capacity of actors engaged in the informal economy to effectively deal with challenges associated with basic needs in emergencies (Alexander 2013). We attempt to enrich the current understanding of resilience in a vulnerable group by revisiting various studies that portrayed the informal economy during the pandemic. By juxtaposing the informal economy's vulnerability toward the pandemic's socio-economy impact and their ability to respond, we are trying to enrich the current academic discussion on resilience and vulnerability as a contiguous concept. Moreover, bringing the context of pandemic-induced economic shocks will give insight into the informal economy study, which is largely contextualised within a market-driven crisis.

3 Method

This paper reviewed existing studies on the impacts of the COVID-19 crisis on the informal economy and its coping mechanism, published until August 2022. Articles related to this research topic were searched in the Scopus database and/or reputable publishers, such as Elsevier, Wiley, Taylor & Francis, Springer, Emerald, Sage, Multidisciplinary Digital Publishing Institute, and PLOS. The keywords used are 'informal economy, 'informal worker', 'informal sector', 'informal labour', and 'shadow economy', each added with 'COVID' so that the selected publications focus on the COVID-19 pandemic period. We limited our search to peer-reviewed journal articles written in English, focusing on socioeconomic contexts. In addition, reports based on reviews, viewpoints, short communications, perspectives, and commentaries were not designed as the primary material in this review. Initial screening was carried out on each article to ensure the relevance of the discussion to the topic and remove articles containing exclusions.

We employed thematic analysis to understand the resilience mechanisms of informal economy actors during unfavourable situations due to the COVID-19 pandemic. This approach identified several significant factors before being arranged into principal themes (Booth et al. 2016). The analysis involved careful reading and re-reading of the articles. The initial analysis began by identifying the impacts on informal workers during the COVID-19 pandemic as a reflection of the impact of the shock on their pre-existing vulnerabilities. Furthermore, we observed how affected people develop coping strategies to mitigate shock, including the role and existence of social protection supports behind them. Finally, we discussed the conceptual framework of informal economy resilience concerning the COVID-19 pandemic as an outcome of synthesising research articles.

4 Pre-Existing Precarity Exacerbated by the COVID-19 Pandemic: A Reflection on Vulnerability

Comprehending the resilience of a group or community is inherently intertwined with comprehending their vulnerability characteristics. It will illustrate the initial capacity of the community when facing hardship and how far the hardships disrupt the initial condition. Proag (2014) mentioned that vulnerability implies a level of risk resulting from the ability to cope with the subsequent event. Usamah et al. (2014) found that vulnerability overlaps with resilience. The study explained that communities are vulnerable in numerous ways but have characteristics that allow them to be resilient.

This review has collated 42 articles, which will be utilised as the primary reference for extracting the impacts of the COVID-19 pandemic on the informal economy. These articles are listed in Table 1. All reviewed articles in this study revealed that the pandemic had unprecedented impacts on the informal economy. Nevertheless, many scholars have considered the informal economy a robust economic activity expected to survive during past crises (Akuoko et al. 2021; Zhanda et al. 2022; Leyva & Urrutia 2022). However, on another side, critical literature explicitly suggests that the COVID-19 pandemic presents different challenges than previous economic volatilities, which may result in different conditions compared to previous crises (Acevedo et al. 2021; Dzawanda et al. 2021; Thanh and Duong 2022).

Table 1 List of reviewed literature
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The implementation of the lockdown policy led to placing the socioeconomically disadvantaged individuals into more fragile conditions, reflecting the possibility of secondary risks arising in conjunction with their exposure to health risks (Das & Das 2020; Jiang 2022). Drawing from prior research, it can be synthesised that there are three primary reasons why a lockdown policy could have precarious effects on the socioeconomic condition: (1) lockdown interrupts the supply–demand chains by transportation ban (Guan et al. 2020); (2) the restriction on population mobility leads to a cessation of economic activities and declining purchasing power (Bassier et al. 2021); and (3) lockdown and the continued decrease in income lead to job losses and or business closure (Rwafa‐Ponela et al. 2022). In the following discussion, we highlight the impact of the COVID-19 pandemic and associated lockdown on the informal economy in three issues: general impacts, disproportionate impacts, and impact chains.

4.1 General Impacts

The pandemic has highlighted the informal economy’s vulnerability. Rather than the virus infection, most of the informal economy activities collapsed due to the derivative policy to handle the pandemic. Staying at home is not feasible for people who depend on daily wages for sustenance (Adom et al. 2020). Informal workers are also less compatible with telework and work-from-home orders (Cárdenas et al. 2021). Then, Egana-delSol et al. (2022) predicted that restrictions generated by COVID-19 act as a catalyst for the automation process in companies to adjust their employment composition and may put workers at risk of being replaced by technology.

Decreased income became the mainstream impact of the pandemic lockdown. For example, in Thailand, 95% of respondents from a study by Komin et al. (2021) indicated that they faced economic insecurity due to income loss during the pandemic. This condition is also found in a study by Guo et al. (2022) in offline micro businesses in China; they found that 50% of owner-managed businesses (OMBs) experienced income loss during the pandemic. Moreover, the loss of income has put informal workers in Nigeria into poverty because daily earnings characterise informal workers; when they do not run economic activities, they will find it difficult to meet their daily needs (Omobowale et al. 2020).

In South Africa, informal food traders were forced to close during the lockdown as they were not considered essential service providers by the government (Rwafa‐Ponela et al. 2022). Domestic workers in India’s major cities were forced to leave their jobs, mainly because of the employer’s unilateral termination, followed by transportation barriers (Sumalatha et al. 2021). Moreover, from the side of informal enterprises, the closure of business activity was mainly caused by the disability to adapt their business activity. Research in Uganda found that most small-medium enterprises closed because they did not have resources and knowledge in digital business, which was very needed during the lockdown (Kimuli et al. 2021).

Specific findings from several studies showed that instead of facing the possibility of job loss, some people experienced an increase in workload, even though it did not cause their income to increase (Pitoyo et al. 2021; Wasima & Rahman 2022). Moreover, the stigma of informal workers as ‘carriers of coronavirus’ is significant because much live and work in poor sanitary environments, exacerbating discriminatory treatment compared to the formal economy (Coletto et al. 2021). Harassment by law enforcement officers was often reported against informal workers operating in illegal places and times (Sohel et al. 2022; Thulare & Moyo 2021; Toriro & Chirisa 2021).

The intensity of precariousness was most felt by informal workers during the early stages of the spread of the COVID-19 virus, especially when the lockdown strategy was implemented. These adverse effects might be reduced during the relaxation phase, but sometimes recovery efforts were insufficient, and there were challenges to recovering quickly. Dzawanda et al. (2021) found that a large proportion of the informal sector in Gweru (Zimbabwe) was still prohibited from functioning optimally in February 2021. At a similar time, informal workers in Taraba State (Nigeria) were still struggling to revive their businesses due to inadequate social security schemes (Lenshie et al. 2021). Meanwhile, work opportunities could decline again, along with temporary restrictions on mobility, when the epidemic curve reaches its second peak phase (Mohan et al. 2022).

4.2 Disproportionate Impacts

The impacts of the pandemic were not uniform among informal worker groups, one of which is related to the urban–rural realm. Almost all the papers reviewed in this study conducted their research in the urban area, indicating that the urban informal economy has become a concern in many regions. A study in China concluded that microbusiness owners in urban areas tend to be more severely affected than rural ones (Guo et al. 2022). Moreover, in Bangladesh, informal workers in rural areas, especially those in the agricultural sector, had less income loss than urban workers (Swarna et al. 2022). This finding reinforces the argument that the crisis is more likely to hit urban areas than rural areas (Narula 2020).

Research indicates that the COVID-19 pandemic and lockdowns hurt occupational groups disproportionately. For example, domestic workers were slightly less affected by declining incomes than other sectors (Komin et al. 2021). Workers who interact with customers or find their markets forced to close are believed to be the hardest hit. Amongst the various categories of informal construction labourers in prominent cities of Indonesia, those engaged in odd jobs – which constitute the lowest-earning occupation within the construction sector – witnessed the most substantial reduction in their monthly earnings throughout the period of regional lockdowns (Wijayaningtyas et al. 2022). Furthermore, a study in Kuwait showed that the pandemic affected informal businesses utilising information and communication technologies and social media differently by sector, with food sector profits declining (Saleh 2021). On the other hand, positive results were recorded in the gaming and entertainment sectors (Saleh 2021).

A gender perspective is no less important since women workers are often considered more vulnerable than men. The gender-based employment gap in pre-crisis situations is becoming more acute amid a pandemic. Some literature reviewed is known to capture the impacts of the COVID-19 pandemic by paying attention to the informal-gender nexus. In India, as women are highly dependent on the availability of public transport, the mobility restrictions triggered by the lockdown have caused women informal workers to suffer occupational impacts. Furthermore, the burden of meeting women’s essential needs, enduring domestic violence, and being overwhelmed with household chores exacerbated their challenges (Mondal & Chakraborty 2022; Singh & Kaur 2022; Sumalatha et al. 2021). The lockdown policy in Nigeria’s suburbs had similar negative impacts by altering women’s job productivity and weakening their role in household livelihoods (Lenshie et al. 2021). Singh and Kaur (2022) emphasised that the pandemic’s effects on women informal workers depend on status and role within the household, occupational types, level of education and skills, and the employers’ prerogatives. The multidimensional impacts mentioned above are rooted in social marginalisation as a manifestation of class, caste, and religious identity discrimination.

Comparisons of the socioeconomic impacts triggered by the coronavirus outbreak between men and women have been carried out by several studies. In Cameroon, the sex group suffering the most significant loss of jobs and income was men informal workers (Ndouna et al. 2021). Meanwhile, the percentage change in income reduction in Bangladesh is more significant for women informal workers. However, the absolute value of the decrease in income is lower than for men workers (Swarna et al. 2022). According to a longitudinal study in 12 cities in 10 countries, women informal workers experienced higher household responsibilities than men. This situation is then linked to extreme income and working hours reductions during the lockdown and slower recovery during the post-lockdown period (Ogando et al. 2021).

Another segment that some literature pays special attention to is migrant workers. A study in Dhaka (Bangladesh) demonstrated that COVID-19 triggered significant income and occupational impacts on migrant informal workers (Sohel et al. 2022). In urban Vietnam, it was found that migrant vendors typically face social capital constraints and political marginalisation, making it more difficult for them to maintain business than local vendors in a lockdown situation (Thanh & Duong 2022). Migrants who come to urban areas in India have also experienced adverse effects of the pandemic, so their efforts to obtain a 'brighter future' have failed (Azeez al. 2021). In addition, the specific impacts experienced by informal migrant workers can also be in the form of difficulties in paying house rent, discrimination in the workplace, and the consequent implications for families who are left behind in the area of origin due to the loss of remittance flows (Sumalatha et al. 2021).

4.3 Impacts Chain

The pandemic impacted the informal economy in the multi-scale community. It impacted the informal economy on micro, meso, and macro levels (Fig. 1). Those impacts are hierarchically connected, as described in an impacts chain by Dzawanda et al. (2021). At the micro level, it impacts the individual of informal workers, such as income, working hours, and the job itself. Those impacts commonly happen directly after implementing the lockdown policy. At the meso level, the pandemic has made it difficult for informal economy households to access basic needs since they have lost almost their source of income. Often, this situation also affects household dynamics and livelihood assets. The impact on the household level can directly or indirectly occur after the lockdown, depending on the ability of informal workers to cope with the distress.

Fig. 1
figure 1

Scheme of the impact of the COVID-19 pandemic on the informal economy

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The adverse impacts on the lower levels subsequently impact the larger system. The indirect impacts discussed herein may arise due to cumulative effects experienced at the individual and household levels. The closure of informal food businesses, such as street vendors or traditional markets, results in a scarcity of affordable food supply (Ndouna et al. 2021; Rwafa‐Ponela et al. 2022). In fact, Informal traders play a crucial role in safeguarding food security within developing countries by offering affordable food options to the general populace (Skinner et al. 2020).

At the macro level, significant consequences include substantial rises in underemployment rates, unemployment, and poverty rates, particularly in countries where the informal economy holds sway. The informal economy experienced higher job losses during the lockdown period, resulting in a subsequent impact on income reduction. In the long term, this situation can potentially lead to poverty or exacerbate existing poverty, including in the dimensions of health, education, and living standards (Alkire et al. 2021).

5 The Coping Mechanisms of Informal Economy Actors

Although informal economies are often labelled vulnerable groups, they have unique mechanisms to address livelihood challenges. The assessment of individual’s preparedness that overfocuses on fragility and ignores their capacity tends to lead to misunderstandings in the meaning of resilience. The limitations of actors working in the informal economy do not make this group give up and surrender to the situation. On the contrary, this power has been formed even when the crisis has not occurred to achieve prosperity. In other words, informal workers are not submissive in dealing with possible hazards, giving the impression that the vulnerability perspective should be closely related to human agency (McLaughlin & Dietz 2008).

5.1 Key Strategies for Addressing Socioeconomic Challenges

It is widely acknowledged that the informal economy is vulnerable to the change in population activities caused by the lockdown policy during the COVID-19 pandemic. The disruption in supply chains also has put them in precarious conditions. Despite this, the informal workers still have response mechanisms to deal with those conditions. For example, in Harare (Nigeria), street vendors collaborated with ex-formal workers who own cars, transforming them into merchandise carts in the face of space closures (Toriro & Chirisa 2021). In South Africa and Vietnam, informal traders changed product prices, explored new products, and employed new delivery methods of supplies (Thanh & Duong 2022; Rwafa‐Ponela et al 2022). Several studies revealed that informal workers adjusted to market situations, reduced production costs, increased work duration (if possible), shifted jobs or did the additional job, and utilised digital information technology (Mondal & Chakraborty 2022; Kimuli et al. 2021; Nasution et al. 2021; Pitoyo et al. 2021; Sohel et al. 2022). In household units, members who previously did not work become involved in obtaining additional income (Mondal & Chakraborty 2022). In contrast to legal activities, informal workers were often also reported to be against government instructions during lockdown due to the impossibility of staying at home and being pressured by the necessities of life (Dzawanda et al. 2021; Thulare & Moyo 2021).

Managing household spending is considered a common response action by affected workers. Primary needs were prioritised, although lack of revenue sometimes constrained expenditures on necessary items. For example, women working in informal sectors might sacrifice their nutritional consumption to meet their children's needs, putting themselves at health risk (Singh & Kaur 2022). In addition, using savings and selling assets was often an option for informal households to survive a crisis, coupled with asking for loans or debts (especially from social networks and moneylenders). However, these asset-depleting strategies were likely to erode household assets more deeply and make livelihood restoration efforts difficult (Hartmann et al. 2022; Mohan et al. 2022; Ogando et al. 2021). Social assistance also plays a vital role in facilitating informal workers to survive during a crisis. This support did not only come from the government but also family, neighbours, and non-governmental organisations, showing that social capital is an important factor in promoting resilience.

In summary, there are three types of survival strategies that informal workers conduct: productive, sacrifice, and external support (Pitoyo et al. 2021). A productive strategy means maximising the potential of productive assets to generate income. The sacrifice strategy emphasises efforts to deplete assets and reduce household expenditures to survive. External support relates to the involvement of external parties and is not related to the use of existing household assets. The categorisation of the common strategies of informal workers in dealing with the COVID-19 pandemic can be observed in Fig. 2.

Fig. 2
figure 2

Categorisation of survival strategies carried out by informal workers (modified from Pitoyo et al. 2021)

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Occasionally, several coping strategies were carried out when the previous economic crisis was not feasible for informal workers. Due to the government's restrictive measures, productive strategies (e.g. increasing working hours and finding alternative jobs) are often difficult to implement, so many people are trapped in unemployment conditions (Thulare & Moyo 2021; Pitoyo et al. 2021). The COVID-19 pandemic also introduces a new type of barrier to urban–rural spheres, where migration should be a social safety net for sustaining urban livelihoods is hindered by restrictive policies (Turner et al. 2021; Wijayaningtyas et al. 2022).

5.2 The Importance of Adequate Social Safety Nets

Internal-based ex-post strategies by informal workers are often insufficient to reduce the effects of a public health crisis. Not all efforts lead to favourable outcomes (also called negative coping strategies). In doing so, adequate emergency relief is needed to mitigate poverty and inequality. For example, in Bahia (Brazil), the negative impacts of the lockdown on informal workers were estimated to be halved through the government's income compensation mechanism (dos Santos et al. 2020). In China, social relief has also been proven to accelerate the recovery of informal businesses during the initial phase of the spread of the coronavirus outbreak (Guo et al. 2022).

Governments in various countries we have reviewed have introduced various social safety net programmes to reduce the livelihood risks of marginalised groups. Unfortunately, these schemes are not explicitly designed to cover informal economy workers. Most informal workers are not registered in social insurance or recognised in labour regulations. Studies in Latin American countries revealed that pre-existing programmes faced some limitations in reaching all households due to limited coverage, and the programmes are not designed to mitigate temporary income shocks (Busso et al. 2021). In some Southeast Asian countries, complicated procedures and requirements often prevent people from obtaining financial aid (Turner et al. 2021; Thanh & Duong 2022). Several studies also found that many informal workers do not receive any social assistance, even though the governments have introduced new social grant policies that are claimed to have a better targeting rate (Alam et al. 2021; Bassier et al. 2021; Komin et al. 2021; Pitoyo et al. 2021; Rwafa‐Ponela et al 2022; Sohel et al. 2022). In addition, some are excluded from social assistance due to gender factors and socio-cultural status, so this discrimination substantially increases the deprivation of vulnerable populations (Adom et al. 2020; Khambule 2020; Lenshie et al. 2021; Singh & Kaur 2022).

Arguably, a large proportion of informal workers is challenging to handle COVID-19 and its after-effects in certain regions. Implemented (unplanned) nonpharmaceutical interventions, which can cut off the income sources of informal workers, are becoming less effective at controlling virus transmission as they are forced to face health risks to remain employed (Nguimkeu & Okou 2021; Banholzer et al. 2022). In many cases, several countries with a high share of informal employment cannot provide adequate stimulus packages. This situation can be related to the government's limited revenue, which affects its ability to design appropriate fiscal policies during a crisis and causes difficulties in dealing with the informal economy actors themselves (Elgin et al. 2022).

6 Discussion and Concluding Remarks

This review highlights that the COVID-19 pandemic and its confinement measures have disrupted the livelihoods of the informal economy. As a result, the vulnerability of the informal economy has increased significantly during this difficult time. Moreover, lower-middle income groups have the potential to fall into poverty or even extreme poverty for poorer households. However, it should be noted that their vulnerability (and the level of resilience) to public health crises are disproportionate, depending on their internal characteristics, response strategies, and government interventions.

Rethinking the resilience of the informal economy due to the crisis induced by the COVID-19 pandemic can be started by looking at the pre-condition until the recovery period (Fig. 3). The COVID-19 shock, along with the lockdown strategy, exacerbates the vulnerable characteristics of the informal economy. Although the pandemic did not immediately disturb the informal economy since they had resistant mechanisms in the early time of the crisis, the ability to resist only lasts temporarily because they lack assets, savings, and work insurance that can sustain them in difficult times. The inbuilt resilience gained from the previous crisis experience is unlikely adequate to adapt to the current crisis, especially when the lockdown policy was starting to be implemented. Consequently, many tried to promote new survival strategies in response to the current crisis (e.g. collaborating with other informal workers and digitalisation).

Fig. 3
figure 3

Scheme of informal economy resilience during the pandemic resistance

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Informal economy actors already have the capacity and adaptability to cope with crises, bringing several survival strategies and innovations during the pandemic. Still, those measures often did not enough to stabilise their condition as before the pandemic because they lost the market due to the lockdown policy and lack of resources. Moreover, they did not have access to social protection other people benefit from, such as business insurance, employment contract certainty, and compensation.

Another key factor contributing to the ability to recover after the pandemic is the informal economy governance (Khambule 2022). Lack of recognition and support would bring the informal economy to a worsening condition and even collapse. Moreover, it makes them unprepared for possible crises in the future. Otherwise, if the informal economy could respond, adapt, and be supported with good governance, it would allow them to recover quickly, bounce back better, and possibly become resilient to disruptive crises in the future. Importantly, this situation does not mean directing people to return to pre-disaster levels (recreate similar vulnerability) but rather carrying out reform efforts to enhance livelihoods (Chen 2020).

The COVID-19 pandemic challenges the informal economy governance, particularly in enhancing their resilience in the face of economic downturn resulting from restrictions on activities. The challenges of improving livelihood security are rising to the surface to deal with the complexity of these issues. These efforts need to pay attention to the pillars of resilience, which consist of: (1) anticipating livelihood challenges, (2) reducing the effects of past and present shocks or stressors, (3) recovering from the effects of past and present shocks or stressors, and (4) thriving even in the context of a difficult livelihood environment (Nyamwanza 2012).

The COVID-19 pandemic also creates a window of opportunity for improving welfare and social justice and stabilising the livelihoods of the informal economy. Most traditional safety nets were not enough to help them cope with distress since the main problem was mismatching in delivering this programme. Data collection on informal workers is needed as a first step to prevent them from collapsing. Discourse for transition to a formal economy tends to escalate to mitigate future shocks. The government should encourage informal economy actors to register in the official database system as part of the formalisation strategy. To make this way, non-governmental organisations concerned with informality issues can assist in this process (Komin et al. 2021; Alam et al. 2021). However, the idea of formalisation of the informal economy is still debatable. On one side, it will create a decent work environment following what is echoed in the Sustainable Development Goals (SDGs). Still, it must be followed by the commitment of the government to provide financial insurance, fulfil workers' rights, and provide infrastructure support. Burdening financial responsibilities, lack of public trust and weak governance can hinder formalisation initiatives.

Due to the ongoing pressure of this sector, informal workers have developed many forms of adaptive capacity, which equip them for larger crises. However, they are still vulnerable to crises such as COVID-19 due to a lack of access to risk protection. These ongoing stressors may also erode their response capacity, leaving them with limited resources. Therefore, an alternative strategy to improve the resilience of the informal economy is to increase the existing capabilities of the same business sector. In this situation, initiatives to boost productivity might include vocational training, the introduction of a digital ecosystem to grow the market, and financial help (Kimuli et al. 2021; Koloma 2021; Vu & Ho 2022). Amid the era of disruption, informal workers are increasingly required to have agile characteristics to survive. In addition, high adaptability is needed in responding to unpredictable changes, so informal workers must also be equipped with business management skills and financial literacy (Ravikumar et al. 2022).

Uneven impacts and responses among informal economy groups perhaps lead to a disproportionate recovery process. Severe consequences are often reported in certain groups whose unique needs are ignored and under-incorporated in policy design. Hence, vulnerability reduction should also promote an inclusive and non-discrimination approach. For instance, the formulation of gender-sensitive policies plays a crucial role in ensuring the sustainability of the livelihoods of women informal workers in times of crisis. Fairness of treatment and prevention of exploitation in the workplace should also be applied to other segments, such as migrant workers or people who are systematically marginalised in socio-cultural identities. Therefore, proactive participation and engagement of vulnerable groups in social dialogue is the key to realising a comprehensive and equitable protection system (Dudzai & Wamara 2021).

The resilience of the informal economy is believed to be dynamic over time and space. Within the same group, informal economy resilience might differ between physical spaces (e.g., rural–urban) and social groups (e.g., men and women, migrant and non-migrant, and other socio-cultural groups). In the context of time, it is also volatile according to the dynamics of social distancing policies, where restriction easing increases the ability of the informal workers to rise, while policy tightening exacerbates their vulnerability. Resilience may evolve through development and an individual's interaction with the environment (Kim-Cohen & Turkewitz 2012). These circumstances may support the individual's resilience (Southwick et al. 2014).

The most important lesson from various studies of the impacts of COVID-19 on informal workers is that the policy response to the pandemic must consider their existence. Inappropriate policies managing multiple institutional demands create a new wave of 'disaster', as evidenced by their multilevel and multifaceted impacts, particularly on poor communities who depend on the informal economy for their livelihoods. The lockdown relaxation is also associated with the gradual recovery of economic activity. Still, handling structural problems is fundamental to transforming the informal economy towards positive changes.

This article reviews studies that primarily focus on implications during the early or peak phases of the pandemic, where the degree of volatility and ambiguity strongly characterises unusual decision-making mechanisms. However, the studies reviewed here are also commonly conducted in less developed countries, so comparing the informal sector in developed countries could enrich the understanding of how the dynamics of this activity during a crisis induced by the pandemic since it is believed that there are clear distinctions between the two types of countries (Gërxhani 2004). For the following study, it is essential to capture the ability of the informal economy to leap forward during the economic recovery or after the pandemic so that it will fill the puzzle of understanding their resilience to global health disasters.