Extending Social Protection – the Solution for Informal Workers?

In a world where high inflation rates and geopolitical conflicts dominate the headlines, the urgent call for universal social protection for informal workers fades into the background. But Laura Alfers knows: This crucial lifeline is more important now than ever.

When the COVID-19 lockdowns began in March 2020, the world woke up to the fact that the shutting down of social and economic activity would have a severe impact on the world’s informal workforce. Images of Indian migrant workers leaving cities on foot in droves, attempting to get home to food and shelter many miles away shook the world and represented the reality of many informal workers trying to survive under lockdown.

Informal workers, who lack labour and social protections, make up over 60 per cent of workers globally, with just over 40 per cent in self-employment. The situation was severe. This opened a policy window, with social protection advocates arguing that only if universal social protection were extended, such a situation would be prevented from occurring again.

Social Protection for Informal Workers Proved Possible

Existing social protection systems were leveraged to provide emergency relief measures, including to workers in the informal economy in some cases. By January 2022, the World Bank had recorded a total of 3,856 social protection and labour market measures aimed at relieving the impacts of the COVID-19 crisis. While most of these measures were short-lived, they still set a precedent: the extension of social protection to workers in the informal economy was possible.

Fast forward to 2024, when the urgent imperative towards extending social protection is less visible. Fiscal consolidation, inflationary pressures, and multiple geopolitical conflicts have all diverted important resources away from extension measures. At the same time, however, these issues reinforce the importance of universal social protection. In addition, they provide an opportunity to clarify and expand on key priority areas.

Three Key Factors to Consider in the Extension of Social Protection to Informal Workers

Women in Informal Employment: Globalizing and Organizing (WIEGO) is a global think tank as well as a network of membership-based organisations of workers in the informal economy. Its role is to act as the bridge between the realities of informal work and policy at local, national, and global levels. WIEGO aims to ensure that workers themselves are at the forefront of shaping the policies and programmes that impact their lives and livelihoods. When informal workers are placed at the centre of the analysis, a few factors become particularly important when thinking about social protection.

Firstly, it is crucial to understand that the informal economy is heterogeneous. That means it includes workers in many different sectors, income levels, occupations, and employment status. Thus, from the perspective of social protection, it is important to acknowledge the difference between covering self-employed informal workers and wage-employed informal workers. While the former are not in an employment relationship and may face additional barriers to access as a result, the latter are in an informal employment relationship in either the formal sector, the informal sector, or in households (such as domestic workers). Therefore, the legal, financing and policy frameworks that aim to expand coverage have to consider the wide variety of workers who are being covered.

Secondly, the informal economy, like the formal economy, is characterised by gender segmentation. Globally, most informal workers are men. However, women are over-represented in forms of informal employment, such as self-employed own-account work, subcontracted outwork, and contributing family work, which carry a higher risk of poverty. Moreover, even when doing the same type of work, women tend to earn merely three-quarters of the earnings of men. This segmentation is a result of multiple forces – gendered social and legal norms, responsibility for unpaid care work, women’s lower bargaining power and so on. Hence, social protection programmes should aspire to challenge women’s unequal position within the labour market.

Finally, informal workers are increasingly organised and can represent themselves at the policy table. Global networks such as the International Domestic Workers Federation, HomeNet International, StreetNet International and the Global Alliance of Waste Pickers are organising and building the capacity of informal workers so that they can represent themselves in dialogue and consultation processes. Social protection policymakers should be aware of these organisations and seek to include them at all stages of policy development and implementation.

Pushing Forward the Extension Agenda: How to Ensure Inclusion of the Most Vulnerable within the Informal Economy

How to adequately finance the extension of social protection to the most marginalised workers remains without doubt the most critical challenge within this process. While it is true that there are informal workers who can financially support their protection through insurance schemes, the more vulnerable workers are those less likely to have the additional income to spare.

Finding the budget for this in the context of deepening fiscal consolidation is not easy, but a variety of innovations are being suggested, for instance, the use of climate financing. Additional sources of financing can be found by gathering contributions from digital platforms, lead firms, and others who profit from the work of informal workers.

Moreover, it is vital to integrate social assistance and work-related social insurance schemes, that allow improved access for vulnerable workers to benefits which workers prioritise. Such design considerations are particularly important for catering to the needs of women workers who face specific life cycle risks. Maternity benefits, for example, are often located within social insurance schemes – rather than social assistance which tends to prioritise child benefits. However, poorer women workers are not always able to afford contributions. This results in excluding them from basic worker’s rights. Uruguay’s social monotax scheme – a simplified tax and social security scheme for self-employed workers – is a programme which incorporates a maternity benefit and a subsidy to facilitate access. Interestingly, the majority of the scheme’s members are women.

Finally, and most importantly, workers need to trust such social protection schemes, especially if they are asked to contribute financially. Without the trust that their contributions are being well looked after, will be paid out timeously, and will be adequate for their needs, workers are unlikely to participate. This is a challenge that links not only to both the financing and design questions but also relates to the very real need to ensure that workers are represented and able to adequately participate throughout the scheme’s development and implementation. As the members of StreetNet International put it: “Nothing for us, without us.”