The informal sector and social protection

Abstract

There is growing interest to extend social protection coverage to people working in the informal economy. This interest has risen through the realization that the right to social protection is not yet a reality for 71 per cent of the world's population (International Labour Organization 2017). In the Asia and Pacific region, for example, only 38.9 per cent of the population are effectively covered by at least one social protection cash benefit compared to 67.6 per cent in the Americas; while Africa has only 17.8 per cent of the population covered (International Labour Organization 2017). Access to social protection is still a challenge, more so for the informal sector, who are not poor enough to qualify for social transfer schemes and not rich enough to participate in existing contributory schemes (OECD 2019).Recent experience with the COVID-19 crisis, especially in low-and middle-income countries, has exposed the fractured labour market and social protection systems that do not cover the 'missing middle' (Rutkowski 2020). Lock-downs that characterized responses to the COVID-19 pandemic meant permanent or temporal loss of work and income for some people in the informal economy. In the North, lock-downs meant that taxis lost 80 per cent of customers, but neighbouring sector food delivery increased (Svynarenko and Perkiö 2020), suggesting that not all informal sectors suffered equally. In some countries, restaurant workers, street vendors and domestic workers could not report for work while farmers in rural areas experienced low sales of their farm produce due to restrictions in movement (ActionAid 2020). At the same time, unpaid care work increased due to closure of schools and other facilities.Governments responded differently when it came to mitigating social-economic challenges caused by the COVID-19 crisis. Reports suggest that cash transfers were being adapted to the COVID-19 response. Administrative adaptations such as flexibility in the time of collection took place in Algeria, while home delivery of cash for seniors was implemented in Armenia (Allahoum et al. 2020). At the same time, Egypt, for example, increased benefits among pre-existing programmes. However, most people remained uncovered by social protection programmes leaving them vulnerable to various shocks. Therefore, extending social protection coverage to the informal economy, including to agricultural workers, presents an opportunity to reduce poverty and vulnerability.This chapter examines contributory social protection coverage, for informal economy workers, including the agricultural sector focusing on alternatives for contributory schemes for this population. In Section 22.3 we discuss the characteristics of the informal economy. Section 22.4 shows the magnitude of informal economy workers across the globe, and Section 22.5 highlights challenges in coverage extension for this group. Section 22.6 presents policy options for extending coverage and argues for an integrated approach comprising tax-financed social transfers, contributory social i...

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