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CLIMATE CHANGE AND THE RISE OF INFORMALITY IN
RURAL LABOUR MARKETS: A CROSS-COUNTRY STUDY OF
NEPAL, BANGLADESH, AND INDONESIA
1
Roza Azkhodjaeva
Doctor of Law, Acting Associate Professor,
Tashkent State University of Law
https://doi.org/10.5281/zenodo.16561321
ARTICLE INFO
ABSTRACT
Qabul qilindi: 20-Iyul 2025 yil
Ma’qullandi: 24-Iyul 2025 yil
Nashr qilindi: 28-Iyul 2025 yil
This paper investigates the link between climate-induced
disruptions and the expansion of informal labour in rural
areas across Nepal, Bangladesh, and Indonesia. Using
case-study methodology and comparative policy analysis,
the research highlights how climate vulnerability
exacerbates labour market insecurities and pushes rural
workers—especially in agriculture and low-skill
sectors—into informal and unstable employment. The
findings aim to support the design of integrated labour-
climate strategies that promote resilience, formalisation,
and sustainable development in Asia-Pacific economies.
KEYWORDS
climate
change,
informal
employment, rural labour, Asia-
Pacific,
labour
insecurity,
Bangladesh, Nepal, Indonesia,
sustainable development.
Introduction.
In recent decades, the intersection of climate change and labour market
dynamics has emerged as a pressing policy issue, especially in the Global South. For agrarian
economies like Nepal, Bangladesh, and Indonesia, where a significant portion of the
population relies on climate-sensitive rural livelihoods, the disruptive effects of climate
change are reshaping the socio-economic fabric of rural communities. Prolonged droughts,
erratic rainfall, rising sea levels, and extreme weather events are not only threatening
agricultural productivity but also undermining the viability of formal employment in rural
areas.
2
These climate-related disruptions interact with existing vulnerabilities in the rural
labour market—such as limited access to education, poor infrastructure, weak regulatory
frameworks, and underdeveloped social protection systems—to push a growing segment of
the rural population into informal employment. Informal jobs are typically characterized by
low wages, lack of job security, hazardous working conditions, and exclusion from legal or
social protections.
3
In the context of environmental degradation, the shift toward informal
labour represents both a coping strategy for households and a structural failure of the state to
provide adequate employment alternatives and social security.
1
This publication/ research was supported by a MSCA-SE scheme within the HORIZON Programme (grant acronym:
PRELAB, GA: 101129940)
2
Hallegatte, S., Rentschler, J., & Rozenberg, J. (2016).
Shock waves: Managing the impacts of climate change on
poverty
. World Bank. https://doi.org/10.1596/978-1-4648-0673-5
3
International Labour Organization (ILO). (2018).
Women and men in the informal economy: A statistical picture
(3rd
ed.). Geneva: ILO. https://www.ilo.org/global/publications/books/WCMS_626831/lang--en/index.htm
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Research Significance. The rise of informality in rural labour markets is not merely an
economic phenomenon; it is deeply embedded in broader issues of environmental justice,
governance, and sustainable development. While previous studies have separately explored
the impacts of climate change and informal employment, limited attention has been paid to
how these two challenges reinforce one another in climate-vulnerable rural settings.
This research addresses this critical knowledge gap by investigating how climate-
induced stressors contribute to the expansion of informality in rural labour markets in Nepal,
Bangladesh, and Indonesia. These countries represent highly relevant case studies given their
high exposure to climate hazards, large rural populations, and elevated levels of informal
employment.
Understanding the causal linkages between climate events and informal employment
patterns is essential for crafting coherent and effective policy responses. It is particularly
timely in light of ongoing international debates surrounding climate justice, decent work, and
the transition to a green economy under frameworks such as the Paris Agreement and the
Sustainable Development Goals (SDGs), notably SDG 8 on decent work and SDG 13 on climate
action.
4
Research Objectives. This study pursues the following core objectives:
1.
To examine how climate change is affecting rural labour dynamics in Nepal,
Bangladesh, and Indonesia.
2.
To identify key structural factors and institutional weaknesses that facilitate the shift
toward informality in rural labour markets.
3.
To provide comparative insights into national responses and gaps in policy
interventions.
4.
To propose policy recommendations that support rural resilience, promote
formalisation, and align labour market reform with climate adaptation strategies.
Structure of the Paper. The paper is structured as follows. Section 2 develops the
conceptual framework and reviews the relevant literature on climate vulnerability, informal
labour, and rural development. Section 3 outlines the methodology employed, including case
selection, data sources, and analytical techniques. Section 4 presents the country contexts,
focusing on the interplay between climate hazards and labour systems in Nepal, Bangladesh,
and Indonesia. Section 5 examines the specific impacts of climate change on rural livelihoods,
followed by Section 6, which explores patterns of informality across key rural sectors. Section
7 undertakes a comparative analysis of the structural drivers of informal employment. Section
8 critically evaluates existing policy responses and identifies key gaps. Section 9 puts forward
policy recommendations, and Section 10 concludes with reflections on future research and
policy needs.
Conceptual Framework and Literature Review. Informal employment, as defined by the
International Labour Organization, refers to work that lacks formal arrangements, legal
protection, and access to social security. In rural settings, informality is often deeply
embedded within subsistence agriculture, casual labour, and seasonal migration. While some
4
United Nations (UN). (2015).
Transforming our world: The 2030 Agenda for Sustainable Development
.
https://sdgs.un.org/2030agenda
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rural informality arises from traditional socio-economic arrangements, it is increasingly
driven by external shocks and structural weaknesses in labour governance.
5
Informality in rural labour markets is distinct from urban informality in several ways.
First, rural informal workers are more likely to be engaged in agriculture, fishing, and
forestry—sectors that are highly vulnerable to climate variability. Second, rural areas
typically suffer from institutional underdevelopment, including weak enforcement of labour
regulations, limited unionisation, and poor infrastructure.
6
Third, informal work in rural areas
is often characterised by low productivity and high precarity, with limited opportunities for
upward mobility.
7
The concept of informality must also be understood through a structural lens: it is not
merely the absence of formality, but rather a function of state neglect, economic
marginalisation, and social exclusion. This perspective is particularly relevant for
understanding how climate stressors aggravate existing vulnerabilities.
Climate Change as a Labour Market Disruptor. Climate change is increasingly recognised
not only as an environmental crisis but also as a socio-economic stressor that affects
livelihoods, labour markets, and human security. Rural economies, especially in low- and
middle-income countries (LMICs), are disproportionately impacted by climate variability due
to their heavy dependence on natural resources and climatic conditions.
The Intergovernmental Panel on Climate Change highlights several pathways through
which climate change affects rural livelihoods:
Direct impacts on agricultural productivity: Changes in rainfall patterns, prolonged
droughts, and temperature extremes reduce crop yields and destroy livestock.
Increased frequency of extreme events
:
Floods, cyclones, and landslides displace
communities, destroy assets, and interrupt economic activity.
Degradation of natural ecosystems
:
Soil erosion, salinisation, and deforestation
diminish the long-term viability of rural occupations.
These environmental changes have immediate effects on rural employment by
destroying jobs, reducing work hours, and increasing occupational health risks. In the longer
term, climate stress contributes to labour displacement, migration, and a growing reliance on
unregulated employment as a survival strategy.
8
Labour Market Informality and Climate Vulnerability: The Nexus. The intersection
between climate change and informal employment is receiving growing academic attention.
Research shows that climate shocks push formal and semi-formal workers into the informal
sector, particularly in agriculture, construction, and small-scale manufacturing.
9
This is
5
Chen, M. A. (2012). The informal economy: Definitions, theories and policies.
WIEGO Working Paper No. 1
.
https://www.wiego.org/publications/informal-economy-definitions-theories-and-policies
6
Meagher, K. (2013). Unlocking the informal economy: A literature review on linkages between formal and informal
economies in developing countries.
WIEGO Working Paper No. 27
. https://www.wiego.org/publications/unlocking-
informal-economy-literature-review
7
Fields, G. S. (2019). Employment in low-income countries: Beyond informality.
IZA Journal of Labor Policy, 8
(1), 1–
20. https://doi.org/10.2478/izajolp-2019-0002
8
World Bank. (2021).
Social protection and jobs responses to COVID-19 and climate crises: Lessons for adaptive
systems
. https://openknowledge.worldbank.org/handle/10986/36709
9
Rentschler, J., & Bazilian, M. (2017). Climate change and infrastructure, resilience and informality.
World Bank
Policy Research Working Paper No. 8285
. https://doi.org/10.1596/1813-9450-8285
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especially evident in regions with weak labour market institutions and inadequate climate
adaptation measures.
In Bangladesh, for instance, repeated flooding and riverbank erosion have forced rural
workers to migrate to cities and accept informal jobs in brick kilns and garment factories
under exploitative conditions. Similarly, in Nepal, landslides and glacial melt are making
farming unsustainable in mountainous regions, pushing men to migrate to informal
construction jobs in India and the Gulf.
10
Indonesia’s archipelagic geography exposes rural fishing communities to climate-
induced sea-level rise, with many resorting to informal service work or internal migration.
The climate-informality nexus is also gendered: women in rural areas, already facing
limited access to assets and credit, are more likely to be pushed into informal domestic or
agricultural labour when climate shocks reduce household income.
11
Existing Literature Gaps. While the individual literatures on informal employment and
climate change are robust, their intersection remains underexplored in most academic and
policy circles. Most research tends to focus on either urban informality or rural agricultural
change, often overlooking the transformation of rural labour systems in response to climate
stressors.
Furthermore, there is limited comparative analysis across countries facing similar
climate-labour vulnerabilities. Studies are often constrained by national silos, despite the
regional nature of many environmental and labour market dynamics in South and Southeast
Asia.
This study contributes to closing these gaps by:
Offering a comparative lens across three countries (Nepal, Bangladesh, and
Indonesia);
Highlighting the structural, policy, and institutional drivers that connect climate
change and rural informality;
Recommending integrated frameworks for climate adaptation and labour
formalisation.
Methodology. This study employs a comparative qualitative case study methodology to
explore how climate-induced disruptions influence the growth of informal labour markets in
rural areas of Nepal, Bangladesh, and Indonesia. Case study research is particularly
appropriate for capturing the complexity of socio-economic and environmental interactions
within specific national contexts.
12
The cross-country comparative design enhances analytical
depth by highlighting both shared patterns and country-specific divergences.
Given the exploratory nature of this research, a qualitative approach enables the
identification of mechanisms, institutional dynamics, and community responses that may not
be visible through quantitative methods alone.
13
In particular, this approach allows for in-
10
Gurung, M. (2021). Climate change and labour migration from the Nepalese highlands.
Himalaya, the Journal of the
Association
for
Nepal
and
Himalayan
Studies,
41
(2),
Article
8.
https://digitalcommons.macalester.edu/himalaya/vol41/iss2/8
11
Huq, S., Reid, H., & Murray, L. A. (2015). Gender and climate change: Women as agents of change. In B. Denton
(Ed.),
Climate change and human development
(pp. 89–106). Zed Books.
12
Yin, R. K. (2014).
Case study research: Design and methods
(5th ed.). SAGE Publications.
13
Maxwell, J. A. (2013).
Qualitative research design: An interactive approach
(3rd ed.). SAGE Publications.
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depth engagement with policy documents, secondary data, and scholarly literature relevant to
labour and climate sectors in the three countries.
Nepal, Bangladesh, and Indonesia were selected based on several shared and
contrasting features:
All three countries exhibit high levels of rural informality, with informal labour
constituting over 65% of total rural employment.
They are identified as climate-vulnerable by the Global Climate Risk Index due to
frequent exposure to extreme weather events, sea-level rise, or glacial melting.
14
They differ in geography, political economy, and institutional development, offering a
rich basis for comparative analysis.
This triangulation of similarity and difference enables both cross-cutting generalisations
and context-specific insights into how climate change shapes labour outcomes.
Academic journals, working papers, and NGO reports were reviewed to contextualize
findings and capture lived experiences of rural informal workers under climate stress. This
helped supplement official statistics with empirical field-based perspectives, especially
regarding marginalised populations (e.g., women, indigenous communities, smallholder
farmers).
Nepal: Climatic Fragility and Labour Market Pressures. Nepal is a landlocked country
located in the Himalayan region, marked by diverse topography ranging from lowland Terai
to high-altitude mountainous zones. This geographic complexity makes it highly vulnerable to
a wide range of climate hazards, including glacial lake outburst floods (GLOFs), landslides,
erratic monsoons, and prolonged droughts.
15
According to the Global Climate Risk Index,
Nepal ranks among the top 10 countries most affected by climate events over the past two
decades.
16
Over 65% of the population resides in rural areas, with agriculture employing about
60% of the total workforce—most of whom are informally employed (CBS Nepal, 2021).
Climate variability has directly undermined agricultural productivity through increasing
frequency of floods, shifting rainfall patterns, and degradation of arable land.
The rural labour market in Nepal is highly fragmented and informal, characterised by
smallholder farming, seasonal labour migration, and household enterprises. Due to limited
industrial development and lack of rural infrastructure, young men often migrate seasonally
to urban areas or abroad (notably India and the Gulf states), where they typically engage in
informal construction or service jobs.
17
This has created a cycle in which climate-induced
livelihood insecurity drives labour outmigration, reinforcing both rural depopulation and
informal urban labour trends.
14
15
Ministry of Forests and Environment (MOFE), Nepal. (2022).
National climate change policy
. Government of Nepal.
https://mofe.gov.np
16
Eckstein, D., Künzel, V., & Schäfer, L. (2021).
Global climate risk index 2021: Who suffers most from extreme
weather events?
Germanwatch. https://germanwatch.org/en/cri
17
Gurung, M. (2021). Climate change and labour migration from the Nepalese highlands.
Himalaya, the Journal of the
Association
for
Nepal
and
Himalayan
Studies,
41
(2),
Article
8.
https://digitalcommons.macalester.edu/himalaya/vol41/iss2/8
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Moreover, policy responses have remained reactive rather than strategic. The National
Climate Change Policy (2022) and the Labour Act (2017) mention climate adaptation and
informal employment but lack meaningful integration across sectors.
Bangladesh: Coastal Exposure and Labour Displacement. Bangladesh’s geographical
concentration along low-lying river deltas renders it extremely vulnerable to sea-level rise,
cyclones, and riverbank erosion. Climate-induced salinity intrusion in the coastal districts has
significantly reduced agricultural productivity, leading to displacement of farming
communities and transformation of the rural economy.
18
Over 40% of Bangladesh’s workforce is employed in agriculture, but this share is
declining rapidly due to land degradation and climate instability. The informal sector absorbs
most of the displaced rural workers, with rising employment in unregulated brick kilns,
fisheries, and seasonal urban construction work. Migration—both seasonal and permanent—
has become a key survival strategy, especially for the poor and landless.
Bangladesh’s National Adaptation Programmes of Action (NAPAs) have acknowledged
the need for climate-resilient employment strategies, but implementation remains limited.
For instance, although coastal embankment projects and climate-resilient agricultural
schemes exist, they are often disconnected from rural employment and labour formalisation
goals.
Gender dimensions are especially prominent in Bangladesh. As men migrate, women are
left behind with limited resources and increasing workloads, often engaging in informal
household industries or agricultural wage labour under exploitative terms.
19
Indonesia: Climate-Linked Livelihood Insecurity in the Archipelago. Indonesia,
comprising over 17,000 islands, faces a diverse range of climate hazards including rising sea
levels, coastal erosion, droughts, and forest fires—especially in Kalimantan, Sumatra, and
Java. The country’s vulnerability is further exacerbated by urbanisation pressures,
deforestation, and dependency on extractive industries.
20
Approximately 40% of Indonesians live in rural areas, where agriculture, fisheries, and
forestry constitute the main sources of livelihood. However, these sectors are increasingly
affected by climate variability, with rural communities facing declining fish stocks, soil
degradation, and water scarcity (BPS, 2021).
Indonesia’s informal labour rate remains high, at around 59% nationally and even
higher in rural provinces. Climate shocks—such as floods or El Niño-induced droughts—
reduce the demand for formal agricultural labour and trigger shifts to informal, temporary
occupations such as petty trade, motorcycle taxi services, and artisanal mining.
Policy frameworks such as the National Medium-Term Development Plan (RPJMN 2020–
2024) and Indonesia’s Nationally Determined Contributions (NDCs) mention employment and
climate resilience but do not fully integrate labour market planning with climate adaptation at
the rural level.
18
Neelormi, S., Ahmed, A. U., & Rauf, A. (2019). Climate change, migration and informal labour markets in
Bangladesh.
Bangladesh Journal of Political Economy, 35
(2), 15–37.
19
Huq, S., Reid, H., & Murray, L. A. (2015). Gender and climate change: Women as agents of change. In B. Denton
(Ed.),
Climate change and human development
(pp. 89–106). Zed Books.
20
Bappenas. (2020).
Indonesia’s low carbon development initiative: A pathway to sustainable development
. Ministry of
National Development Planning. https://lcdi-indonesia.id
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In some areas, especially in East Nusa Tenggara and Papua, climate-induced
displacement has caused tensions over access to land and jobs, further complicating rural
labour dynamics.
21
These shocks directly reduce crop yields, destroy infrastructure, kill livestock, and
degrade natural ecosystems on which rural populations depend for sustenance and income.
For example, the 2020 monsoon floods in Bangladesh inundated over 40% of the country’s
landmass, displacing nearly 5 million people and leading to widespread loss of employment
and assets in rural regions.
22
In Nepal, erratic monsoon rainfall and glacial melting have
altered sowing and harvesting cycles, diminishing land productivity and creating new
uncertainties for subsistence farmers. Indonesia, meanwhile, experiences repeated forest fires
in dry seasons that not only affect rural incomes through ecological destruction but also cause
severe health and air pollution crises, affecting productivity.
Agricultural Insecurity and Loss of Traditional Livelihoods. Agriculture is the dominant
sector of rural employment across the three countries. Yet it is the most climate-sensitive,
with even minor temperature or rainfall fluctuations significantly affecting yields of rice,
maize, jute, and other staple crops. Studies show that rice yields in Bangladesh fall by up to
10% for every 1°C rise in average temperature. Similarly, in Nepal, maize and millet
production has become increasingly erratic due to shifting precipitation patterns.
23
The growing unpredictability of crop cycles has pushed smallholder farmers—who
constitute the majority of rural households—into distress. Many either abandon agriculture
altogether or reduce investment in land cultivation. This transition away from land-based
livelihoods increases dependence on seasonal wage labour, informal service work, or unsafe
migration.
24
In coastal Indonesia, sea-level rise is contaminating freshwater supplies and inundating
arable lands. In provinces like Central Java and Aceh, traditional paddy farming is giving way
to informal aquaculture and charcoal production—often unregulated and environmentally
degrading.
Climate events often lead to the destruction of productive and household assets—
farmlands, tools, storage, livestock—which in turn triggers spirals of indebtedness and loss of
social mobility. According to the World Bank, over 75% of disaster-induced displacement in
South Asia affects rural areas.
Displacement caused by floods, salinity intrusion, and riverbank erosion is especially
acute in Bangladesh, where millions are forced to migrate to peri-urban or urban fringes
every year. However, this migration is often undertaken without access to decent jobs or
housing, driving displaced populations into highly informal, exploitative, and insecure work
environments.
21
Asian
Development
Bank
(ADB).
(2021).
Indonesia:
Climate
risk
country
profile
.
https://www.adb.org/publications/climate-risk-country-profile-indonesia
22
ReliefWeb.
(2020).
Bangladesh
monsoon
floods
–
Situation
report
No.
5
.
https://reliefweb.int/report/bangladesh/bangladesh-monsoon-floods-situation-report-no5-24-august-2020
23
Ministry of Forests and Environment (MOFE), Nepal. (2022).
National climate change policy
. Government of Nepal.
https://mofe.gov.np
24
Adams, H., & Upreti, B. R. (2020). Migration, informality and climate change in South Asia.
Journal of South Asian
Development, 15
(2), 180–202. https://doi.org/10.1177/0973174120928483
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In Nepal, climate-induced asset loss is a key factor behind youth labour migration to
India and the Gulf. This migration often takes the form of informal labour contracts, which
leave workers without legal recourse or social protection.
In Indonesia, forest fires and droughts have displaced indigenous communities and
disrupted traditional fishing practices. Climate-linked land degradation has particularly
affected ethnic minorities and rural women, exacerbating existing socio-economic
inequalities.
25
Health and Productivity Loss. Beyond immediate economic impacts, climate change has
indirect effects on rural labour productivity through deteriorating health conditions.
Prolonged exposure to heat, poor air quality due to forest fires, and the spread of waterborne
diseases after floods significantly reduce work capacity.
Rural workers engaged in physical outdoor labour—such as farming, brick-making, or
road construction—face heightened vulnerability. A recent ILO study estimates that heat
stress alone could reduce total working hours in South Asia by up to 5% by 2030, equivalent
to 43 million full-time jobs
These effects are not evenly distributed. Women, children, and elderly rural populations
often experience higher health-related risks due to poorer access to care, social norms
restricting mobility, and increased unpaid domestic labour burdens during and after climate
crises.
Sectoral Composition of Informal Labour. Agriculture is the largest employer in rural
areas across all three countries, and it is also the most informal. Smallholder farmers typically
rely on family labour, occasional hired help, or seasonal workers without any written
contracts or statutory benefits. The lack of collective bargaining mechanisms and market
integration further entrenches informality.
In Bangladesh, for example, tenant farmers and agricultural day labourers are often paid
in kind or via piece rates, with no formal documentation of work performed. In Indonesia’s
plantation sector, including palm oil and rubber, informal wage arrangements dominate,
particularly among indigenous or landless populations.
Rural Construction and Infrastructure Work. Climate-induced migration has pushed
many rural workers into construction work, often on public infrastructure or private real
estate projects in nearby towns or urban fringes. However, rural construction work is rarely
formalised. Workers are paid in cash, typically hired through subcontractors, and lack safety
equipment, health insurance, or grievance redress mechanisms .
Nepal’s road construction in hilly regions, partly funded by foreign aid or local
governments, employs thousands of such informal workers, especially women and internally
displaced persons.
26
In Indonesia and parts of Bangladesh, rural livelihoods also depend on artisanal fishing
and forestry, both of which are experiencing high levels of informalisation. Declining fish
25
Bappenas. (2020).
Indonesia’s low carbon development initiative: A pathway to sustainable development
. Ministry of
National Development Planning. https://lcdi-indonesia.id
26
Gurung, M. (2021). Climate change and labour migration from the Nepalese highlands.
Himalaya, the Journal of the
Association
for
Nepal
and
Himalayan
Studies,
41
(2),
Article
8.
https://digitalcommons.macalester.edu/himalaya/vol41/iss2/8
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stocks and encroachment by industrial actors force small-scale fishers to work under
informal, often exploitative, arrangements with local middlemen.
Forestry in Kalimantan and Papua involves informal loggers and charcoal producers,
many of whom are internally displaced or landless migrants. These workers operate outside
any legal licensing system and often face criminalisation, despite their dependence on these
sectors for survival.
Informal service work is increasingly common in rural and peri-urban zones. This
includes mobile vendors, domestic work, transportation services (e.g., ojek in Indonesia), and
basic repairs. These occupations typically emerge in the absence of formal employment
opportunities and are characterised by income volatility, long working hours, and zero labour
protections.
Post-climate-disaster environments often see a rise in such activities as coping
mechanisms. For instance, in flood-prone districts of Bangladesh, displaced women often start
informal home-based businesses (e.g., sewing, food sales) to replace lost agricultural income.
Gender Dimensions of Informality. Rural women are disproportionately represented in
informal employment. This is due to patriarchal norms, unequal access to land and finance,
and the burden of unpaid care work. Women are often relegated to informal home-based
work, seasonal agricultural labour, or low-paid service jobs.
In Nepal, women-headed households affected by climate-related displacement are
frequently engaged in informal agricultural work or domestic service. In Bangladesh, women
from coastal regions impacted by salinity intrusion often become informal wage labourers in
shrimp processing or garment subcontracting chains. In Indonesia, rural women play
significant roles in informal agricultural and trading activities but are rarely included in
labour policy consultations or rural development programs.
27
Overview of Comparative Logic. To develop effective, context-sensitive policy responses,
it is essential to understand the underlying structural forces that drive informality in rural
labour markets. Although climate change acts as a key trigger for informality, it operates
within a broader set of economic, institutional, and socio-political dynamics. This section
synthesises cross-country evidence from Nepal, Bangladesh, and Indonesia to identify both
shared and country-specific drivers of informal rural employment.
In all three countries, rural labour markets operate largely outside the purview of formal
institutions. Labour inspection mechanisms are either absent or underfunded in rural areas,
and employment laws are poorly enforced. This administrative vacuum has allowed informal
arrangements to become the default mode of employment.
For example, rural employers rarely register workers, offer contracts, or comply with
minimum wage provisions. Moreover, dispute resolution mechanisms are inaccessible to
rural workers, and trade unions are almost entirely absent outside of urban centres.
28
Another shared feature is the low level of formal education among rural populations,
which limits their access to stable, formal-sector jobs. In Nepal, over 40% of rural adults have
27
Bappenas. (2020).
Indonesia’s low carbon development initiative: A pathway to sustainable development
. Ministry of
National Development Planning. https://lcdi-indonesia.id
28
Meagher, K. (2013). Unlocking the informal economy: A literature review on linkages between formal and informal
economies in developing countries.
WIEGO Working Paper No. 27
. https://www.wiego.org/publications/unlocking-
informal-economy-literature-review
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no formal education. Similarly, functional illiteracy remains high in remote parts of
Bangladesh and Indonesia.
The lack of access to vocational training and skill development services in rural areas
further restricts occupational mobility. Informality thus becomes both a consequence of
exclusion from formal sectors and a survival strategy.
Across the three countries, rural land tenure is often insecure or informal. Smallholder
farmers and tenants frequently lack legal documentation of land ownership or lease rights,
making them ineligible for formal agricultural loans or subsidies (World Bank, 2021). As a
result, they are forced to rely on informal credit markets and engage in low-return, informal
labour.
Land fragmentation exacerbates this problem. In Bangladesh and Nepal, for instance,
many rural households own plots that are too small to generate subsistence income, pushing
them into supplementary informal wage labour.
29
Traditional gender roles and discrimination systematically push women into informal
employment. Women in rural areas have less access to land, education, and financial services,
and are more likely to be engaged in unpaid or home-based informal work. Climate shocks
worsen this marginalisation by increasing the burden of unpaid care and reducing household
income.
30
Country-Specific Structural Drivers. Nepal's rural labour market is heavily influenced by
international migration, especially to India and the Gulf states. While migration offers income
opportunities, it has created a dependency on remittances and entrenched informality both at
home and abroad. Migrant workers often leave without formal contracts, work in exploitative
conditions, and remit income that supports informal enterprises back home.
Additionally, post-disaster recovery efforts, such as after the 2015 earthquake, have
relied on informal rural labour for reconstruction without providing job security or social
protection.
In Bangladesh, massive environmental displacement—especially from coastal erosion,
flooding, and salinity intrusion—has been a critical driver of informal employment. Many
displaced rural households move to peri-urban zones or slums, where they work in informal
services, construction, or subcontracted manufacturing with minimal regulation.
The country also suffers from weak inter-agency coordination between labour,
environment, and disaster management authorities, which hinders the development of
integrated formalisation strategies.
Indonesia’s decentralised governance structure gives significant autonomy to provinces
and districts. While this allows for local adaptation, it has also resulted in fragmented
regulation and enforcement. In many provinces, local governments lack capacity or political
will to formalise rural employment or monitor working conditions in agriculture and forestry.
The presence of extractive industries in rural Indonesia—such as mining and palm oil—
has also encouraged informal subcontracting and casual labour arrangements that escape
national oversight.
29
Neelormi, S., Ahmed, A. U., & Rauf, A. (2019). Climate change, migration and informal labour markets in
Bangladesh.
Bangladesh Journal of Political Economy, 35
(2), 15–37.
30
Huq, S., Reid, H., & Murray, L. A. (2015). Gender and climate change: Women as agents of change. In B. Denton
(Ed.),
Climate change and human development
(pp. 89–106). Zed Books.
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Structural drivers of informality do not act in isolation—they reinforce each other. For
instance, weak institutions fail to regulate informal labour or respond to climate disasters,
which increases vulnerability and incentivises informal coping strategies. Similarly, insecure
land tenure restricts access to credit, limiting investment in resilient livelihoods and trapping
workers in low-productivity informal jobs.
This dynamic reinforces the “informality trap”, where informal work becomes both a
cause and consequence of climate vulnerability.
Policy Responses and Gaps. All three countries under study—Nepal, Bangladesh, and
Indonesia—have adopted a variety of national strategies and action plans to address either
climate change or labour market challenges. However, most of these responses operate in
silos, with limited cross-sectoral integration between labour formalisation, climate
adaptation, and rural development.
Nepal’s key frameworks include the National Climate Change Policy
and Labour Act
.
The climate policy emphasises community-based adaptation and resilience building, while the
Labour Act establishes basic worker rights. However, rural informal workers—especially
migrants, seasonal workers, and women—are rarely covered by enforcement mechanisms or
consulted in policy design.
31
The Prime Minister Employment Program aims to generate
temporary jobs, but it lacks sustainable funding and often supports low-productivity tasks.
Bangladesh has developed relatively advanced planning instruments such as the
National Adaptation Programme of Action (NAPA)
,
Bangladesh Delta Plan 2100
,
and the
National Labour Policy
.
The country has also pioneered social safety net programs
,
such as
the Vulnerable Group Development (VGD) and Food-for-Work schemes, which target climate-
affected rural populations.
However, coordination challenges persist. Employment policies rarely account for
environmental displacement, and climate plans insufficiently address labour market
formalisation. Moreover, the expansion of informal urban settlements caused by rural
displacement has outpaced policy responses.
Indonesia’s National Medium-Term Development Plan (RPJMN 2020–2024)
and
Nationally Determined Contributions (NDCs) recognise both climate and employment
challenges, including targets for green job creation. Decentralisation reforms allow for local-
level adaptation and labour programming, especially in climate-vulnerable provinces.
Nonetheless, implementation varies widely. In provinces such as Kalimantan and Papua,
weak institutional capacity, limited budgets, and poor data on informal workers hamper
policy effectiveness. Most climate-focused programmes prioritise infrastructure and
environmental conservation without addressing labour vulnerabilities.
32
Conclusion.
This study has explored the complex and multifaceted relationship
between climate change and the expansion of informal employment in rural labour markets
across Nepal, Bangladesh, and Indonesia. Through a comparative and thematic analysis, the
research reveals that climate-induced disruptions—such as floods, droughts, sea-level rise,
and ecosystem degradation—are not merely environmental events but catalysts of structural
31
Ministry of Forests and Environment (MOFE), Nepal. (2022).
National climate change policy
. Government of Nepal.
https://mofe.gov.np
32
Bappenas. (2020).
Indonesia’s low carbon development initiative: A pathway to sustainable development
. Ministry of
National Development Planning. https://lcdi-indonesia.id
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labour market transformations, particularly in rural areas where formal employment
opportunities are scarce.
Several important conclusions emerge from the analysis:
1.
Climate change is a critical driver of informal employment in rural economies. By
destroying agricultural livelihoods, displacing communities, and reducing economic security,
climate events push rural workers—especially those with limited assets or education—into
informal, unregulated, and insecure forms of work.
2.
Informality is structurally embedded in rural labour markets. It is perpetuated by
weak institutional frameworks, inadequate labour inspection, fragmented governance,
insecure land tenure, and poor access to education and training. Climate shocks act as stress
multipliers within these vulnerable systems.
3.
Women, landless farmers, and migrants bear the disproportionate burden of informal
employment, often working under exploitative conditions with little or no access to social
protection or public services.
4.
National policies are fragmented and under-integrated. Labour formalisation
strategies are rarely coordinated with climate adaptation efforts, and existing social
protection mechanisms are not designed to address the specific needs of climate-displaced
informal rural workers.
5.
Despite differences in geography and governance, the three countries share many
common challenges—including rural institutional weakness, informalisation of climate-
affected sectors, and policy neglect of gender and social equity.
Contribution to Scholarship and Policy. This research contributes to academic
scholarship by linking the climate-labour nexus within rural informality, a field that has
received insufficient attention in both climate adaptation literature and labour market
studies. By drawing on cross-country comparisons and structural analysis, the paper
challenges the view of informal labour as a purely economic outcome, instead situating it
within a dynamic interaction of environmental, institutional, and socio-political forces.
For policy practitioners, the findings underscore the urgency of breaking silos between
climate, labour, and rural development sectors. Climate action must go beyond infrastructure
or conservation and embed strategies for inclusive, sustainable, and dignified rural
employment. Similarly, labour market reforms must internalise the growing reality of climate-
induced shocks and design systems that can adapt, absorb, and support vulnerable
populations.
While this study offers an in-depth examination of three highly affected countries,
several avenues remain open for future research:
Empirical fieldwork with affected rural communities, including longitudinal studies,
would enrich understanding of how informal employment evolves before and after climate
events.
Quantitative modelling could better estimate the contribution of climate stressors to
informal labour expansion, distinguishing it from economic or demographic drivers.
Policy evaluation studies are needed to assess the effectiveness of existing adaptation,
job creation, and social protection programs in reducing informal employment in rural areas.
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Comparative research across other regions (e.g., Sub-Saharan Africa, Latin America)
could reveal whether the trends observed in South and Southeast Asia are globally
generalisable.
The rise of informality in rural labour markets under climate change is not inevitable. It
is the outcome of choices—political, institutional, and economic-that fail to protect the most
vulnerable while navigating the realities of a changing climate. With proactive, integrated, and
inclusive strategies, governments and development partners can turn crisis into
opportunity—by building adaptive capacities, promoting decent work, and supporting a just
transition to sustainable rural economies.
The stakes are high. Without decisive action, informal labour will continue to grow as a
mechanism of survival, locking millions into a cycle of precarity and exclusion. But with
informed policy, genuine political will, and community engagement, it is possible to imagine a
rural future that is both climate-resilient and socially just
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