Social protection and the informal economy

Koen Rossel-Cambier, Social Protection Programme

Social protection and the informal economy

Koen Rossel-Cambier, Social Protection Programme

ILO objective on Social Protection

ILO objective on Social Protection

Enhance

the coverage and effectiveness of the Social Protection

for

ALL

Long-termLong-termpermanentpermanentdisabilitydisability TemporaryTemporary

disabilitydisability

SurvivorsSurvivors

Short-termShort-termbenefitsbenefits

Family Family allowancesallowancesLong-termLong-term

benefitsbenefits

EmploymentEmploymentinjury injury

benefitsbenefits

MaternityMaternity SicknessSickness

PensionsPensionsInvalidityInvalidity

SurvivorsSurvivorsOld-ageOld-age

UnemploymentUnemploymentbenefitsbenefits

CONVENTION No. 102CONVENTION No. 102

Medical Medical carecare

Why social protection?Why social protection? Minimum standards of social needs for nine main social security

branches in following benefits (ILO Convention No. 102) : – Sickness benefit– Maternity benefit– Old-age benefit– Invalidity benefit– Survivors benefit– Family benefit– Employment injury benefit– Unemployment benefit

– Medical Care A wider definition of social protection inludes as well :

– housing – social exclusion/social assistance

Provision of basic universally available

services

Creation of an environment for development of additional voluntary retirement income and access to private health services

OBJECTIVES OF SOCIAL PROTECTION SYSTEM

OBJECTIVES OF SOCIAL PROTECTION SYSTEM

Availability of incomemaintenance benefits

Direct transfers frompublic budgets fundedby the tax system

Contributions from employers and

employees

Income derived fromsaving accumulatedover a working life

RESOURCES NEEDEDRESOURCES NEEDED

BASIC FUNCTIONS OF MODERN SOCIAL PROTECTION SYSTEMS

BASIC FUNCTIONS OF MODERN SOCIAL PROTECTION SYSTEMS

A safety net function, which should ensure that each member of the society facing destitution is provided with the minimum level of cash income, health and social services that allows the member to lead a socially meaningful life;

An income maintenance function, which permits economically active members of society, or all residents, to build up entitlements that allow them to maintain a decent standard of living during periods of unemployment, sickness, maternity, old age, invalidity and survivorship, when other forms of income and activity are not possible.

MULTI-TIERED SYSTEMMULTI-TIERED SYSTEM

A universal tier

Anemployment-related social

security tier

Acomplementary

tier

Financed byProvide

A range of incomemaintenancebenefits and health care services

Additional cash benefits and healthcare services

Employers’ and employees'contributions

Supplementaryemployment-related schemes on voluntary or compulsory basis

Individual savings

Flat-rate benefits and basic healthservices

Annual basisfrom taxation

Present SituationPresent SituationPresent SituationPresent Situation globalization and flexibility of labour

markets 80% of world population insufficient

coverage 50% of world population – no SP majority of those in developing countries majority of those in informal economy particularly women

Group of non-coveredGroup of non-covered

Self-employed, in small and medium size enterprises and growing informal economy, rural and urban areas

Unpaid family labour, mainly in agriculture Disabled persons Casual and intermittent workers Women workers, mainly domestic

workers.

Reasons for low coverageReasons for low coverage

Conventional social security use the employer/employee relationship as a basis for coverage

Low and irregular income of informal economy workers reduce their capacity to make contribution

Ignorance of social security rights and obligations Legislative requirements, particularly those concerning

employment status, exclude some informal sector workers from participation

Bureaucracy geographic accessibility of social protection institutions

Redistribution: A Vicious Cycle Redistribution: A Vicious Cycle

• Income poverty leads to ill health– Half of the burden of communicable diseases is

concentrated in the poorest 20%– Globally the poorest 20% experience three and a

half the mortality of the richest 20%, an equivalent to excess mortality of nearly 10 mil. deaths per year

• Ill health contributes to poverty– Recent studies attribute a 20% loss of GNP in Sub-

Saharan Africa to malaria– Studies in East Asia show that 50% of financial

crises in poor families are triggered by catastrophic illnesses including TB, HIV and severe malaria

RedistributionA Vicious Cycle

RedistributionA Vicious Cycle

Income Poverty

Ill Health, MalnutritionHigh Fertility

Food SecurityHousehold caring practicesFemale illiteracyAccess to water sanitation, low access to preventive and basic curative care etc

Health care is a high proportion of health expendituresCatastrophic illnesses increase economic vulnerabilityLoss of wages, economic opportunities

Poverty

Strategies for Extending SPStrategies for Extending SPStrategies for Extending SPStrategies for Extending SP

Vertical extension:– Social security services– HIV/AIDS– OSH– Quality and access

Horizontal extension– Strengthening of “classic” schemes:

• Extending social insurance schemes• Universal benefits• Social assistance

– Encouraging decentralized mechanisms– Creation of linkages between both

FORMAL SOCIAL PROTECTION SYSTEMS: COMPONENTS

FORMAL SOCIAL PROTECTION SYSTEMS: COMPONENTS

Social security systems:statutory employment-related benefits

(pensions, short-term cash benefits,social health insurance)

Universal social benefit systems:benefits for all residents (family allowances,

public health services, demogrants for old age)

Private benefit systems:employment-related or individual benefits (occupational pensions, employer-provided

health insurance)

Social assistance systems:poverty alleviation benefits in cash and kind

for citizens and residents in special need

THE STRUCTURE OF A FORMAL NATIONALSOCIAL PROTECTION SYSTEM

THE STRUCTURE OF A FORMAL NATIONALSOCIAL PROTECTION SYSTEM

NATIONAL SOCIAL PROTECTION SYSTEM

Familybenefits

Healthcare

Others

Universalschemes

Socialassistance

Socialcare

Incomesupport

Others

Socialinsuranc

e

Pensions

Short-termbenefits

Healthinsurance

Others

Occupationalpensions

Privatehealth

insurance

Others

Privateschemes

Social health

insurance

Social health

insurance

UNIVERSAL

SERVICES

UNIVERSAL

SERVICESSOCIAL

ASSISTANCESOCIAL

ASSISTANCEMicro-insuranceMicro-insurance

Defined by law

Public / semi-public

Contributions

Amongst contributo

rs

Defined byMIS

Private

Workers and

families

Contributions workers and employers

all

Taxes Taxes

Redistribution to poor

Defined by law

Only for defined categories / law

or private

Public Public / NGOs

Four approaches Four approaches

Financing

Administration

Services

Coverage

Group work 1. The lawyers of the extension of social protection in health

Group work 1. The lawyers of the extension of social protection in health

Each group defends a different approach for the extension of social protection :– HMIS– Universal benefits– Social health insurance– Social Assistance– Private insurance

A lawyer of each group tries to find the inconveniences of the other approach and defends its own approach

A committee of judges will make a final judgement

HMIS Social

Assistance

Social health insurance

Private insurance

Universal coverage

Avantages -Solidarity-Based on needs-Participation of beneficiaries

-Solidarity-Focus on poor-Needs based

-Solidarity-Pooling: contributions of workers, employers and state

-Access to quality services-Adapted to needs-Private management

- No heavy administration of contributions or benefits - No exclusion

Disadvantages

-Limited resources and benefits-Limited risk pooling-Limited access to public funds

-expensive-management-criteria

-exclusion informal economy

-Expensive-Exclusion of poor and risk categories

-Expensive: public funds needed-Quality problems if no monitoring

Health insurance: Lessons and issues for middle-income countries

Health insurance: Lessons and issues for middle-income countries

The achievers: South Korea and Costa Rica (political commitment, public expenditure and formal labour force).

Striving for universal coverage: Colombia and Tunisia (fast-track versus gradualist; effective design and organization; constitutional commitment).

Policy issues: (i) when to go for universal compulsory coverage? (ii) how to deal with the self-employed? (iii) impact of voluntary associations.

Low-income countries: Micro-insurance and area-based schemes

Low-income countries: Micro-insurance and area-based schemes

Efficient solution to immediate needsHow to up-scale: training in design and

management; monitoring and regulation; co-financing arrangements; re-insurance.

Experiment with area-based (health) insurance schemes, (district level in India)

Dealing with health care can be fun!Dealing with health care can be fun!

The global campaign on social security and coverage for all

The global campaign on social security and coverage for all

Aim: Extend coverage to all (access to health care and income security)

Different approaches to extension: Extend statutory schemes Improve governance and design New schemes for uncovered groups Community- or district-based schemes Working together with actors and institutions.

Initiatives on the Extension of Social Security by the ILO

Initiatives on the Extension of Social Security by the ILO

1. Extending social security through social dialogue.2. Special programme for Portuguese-speaking African

countries.3. The Global Social Trust Pilot Project4. Strengthening community-based social security

schemes5. Extending health care coverage in Latin America and

the Caribbean6. The Africa initiative7. Training programme on the extension of social

protection

THANK YOU THANK YOU