» What are the comparative advantages of social insurance as a mechanism for extension?

• Social insurance is a compulsory and statutory insurance mechanism. As such, the potential for population coverage is strong
• As it is financed by contributions, it depends less on government revenues than other mechanisms and it is more financially sustainable
• Contributions are shared between employers and employees, which makes the coverage more affordable for employees
• It is often administered in co-determination with employers, employees and governements. It thus fosters social dialogue and limits political influence
• It covers potentially all risks and provides a comprehensive benefit package
• It includes redistribution, reinforcing solidarity and fighting exclusion within a society
• It encourages social integration by conveying the idea that everyone has rights but also duties

 »  What are the limits of social insurance as a mechanism for extension?

Several characteristics of social insurance make the coverage of the informal sector more difficult to achieve

• Social insurance is employment-related. As such, it is more difficult to reach non-organised groups of workers.
• It requires a certain level of formality which is often not met in the informal economy: it is difficult to identify people from the informal sector, to know how much they earn and consequently to determine their level of contribution.
• It also requires an administrative infrastructure to collect the contributions, which is difficult to set up when the target population lives in various scattered and remote areas.

Moreover, social insurance corresponds to a certain project of society, which relies on solidarity. But this vision is not universally shared

 » Social security: A new consensus, ILO, 2002 Chapter III gives information on the four main ways to extend social protection, and among them the extension of social insurance.

 » The extension of social security coverage: The approach of the International Labour Office, E. Reynaud, 2002 In this document lines of action for extending social security through social insurance are suggested(p.8)

 » Social Security Pensions, Development and reform, C. Gillion, C. Bailey, et al, 2000 Chapter 16 reviews several policy options to extend the coverage of pension schemes both within the formal sector of the labour market and to the informal and self-employed sector. These alternatives include extending existing social insurance schemes and adapting existing social insurance schemes.

 » Perspectives on the social security system of China, A. Drouin, L.H. Thompson, 2006 (ESS Paper)This paper describes the current Chinese social insurance system and it raises a number of issues concerning the development of this system.

 » Evaluating the impact of health care reform in Colombia: from theory to practice, A. Gaviria, C. Medina, C. Mejia, 2006 This document is an evaluation of the health reform implemented in 1993 in Colombia. Part of this reform was the extension of social health insurance to the poor through a subsidized system. It shows the positive effect of this new mechanism but also the difficulties and challenges faced.

 » Extending social security coverage in Africa, C. Bailey, 2004 (ESS Paper) This paper exposes why several African countries decided to rely on social insurance to include the self-employed in the social security scheme.
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» Training

 » Strategies for the extension of social protection
This program explores, among others, the strategy of extension based on social insurance.

» Glossary
 »  Employee
 »  Self-employed person
 »  Social security

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