Social protection coverage of the world’s 2bn informal economy workers must be improved by ensuring that social insurance systems are adapted to their needs, according to a new report from the OECD and the ILO.
Tackling Vulnerability in the Informal Economy says that even though many who depend on the informal economy for their livelihoods are out of reach of public policies; their lives can and must be improved.
The report underlines that nearly 42% of informally-employed workers live in poverty and hourly wages in the informal economy are on average 51% of formal economy wages. In addition, women are more often found in the most vulnerable forms of informal employment.
A headline recommendation for tackling these issues is to extend contributory social protection to informal economy workers, the report states, and that “much can be learned from the experience of some developing countries” in doing this.
It highlights Brazil’s adapting social insurance contributions to seasonality, supplemented by subsidies; Cabo Verde’s mandatory social insurance contributions for the self-employed; and the Philippines’ voluntary contributions from informal sector wage workers. Harnessing the power of digital and mobile technology and extending social and labour rights to domestic workers are also presented as “crucial” to extending coverage to protect informal economy workers.
Based on its research, the OECD recommends that governments worldwide both adapt benefits to the needs and constraints of informal economy workers and subsidise contributions for workers with low-incomes.
The recommendation comes as Development Pathways offers up a multi-tiered child benefit as a previously overlooked, but potentially powerful and more immediate incentive for workers in the informal economy workers to participate in social insurance. This follows Shea McClanahan setting out this idea in a presentation at the February 2019 Universal Child Grant conference.
Shea McClanahan, commenting, said: “The OECD and ILO rightly identify the need to adapt social protection systems to the needs of workers in the informal economy. Especially in countries where the expansion of social insurance systems is a top priority, it’s vital that governments seek innovative solutions to address the key constraints preventing people from joining contributory systems, while still offering adequate protection over the lifecycle to those who lack the ability to pay contributions. If well designed, this can be done in a way that becomes more and more affordable to nations over time.”