Social security for
the informal sector: Issues, options and tasks ahead
Wouter van Ginneken
Social Security Department,
International Labour Office, Geneva
The Interdepartmental Project on the Urban Informal Sector carried out research and experimental projects in 1994/95 to demonstrate how to improve the quality of employment, particularly, productivity, social protection and occupational safety and health through enhanced access to resources and markets, collective action and regulatory reforms. Since this requires broad policy packages, it was designed as an integrated multidisciplinary project with many components that need intense ILO interdepartmental cooperation in its implementation.
The conception of the idea of the project dates back to the 78th Session (1991) of the International Labour Conference at which the central theme of discussion was the Director-General's report on "The dilemma of the informal sector". The dilemma, as explained in the report, was whether to promote the informal sector as a provider of employment and incomes; or to seek to extend regulations and social protection to it and thereby possibly reduce its capacity to provide jobs and incomes for an expanding labour force.
Although it is recognized that the full range of existing laws, regulations and labour legislation cannot be immediately applied in the informal sector without reducing its capacity to create jobs and/or drive it further underground, this project was conceived on the assumption that it is not necessary to make a choice between the above two objectives and that productivity and social protection could be mutually reinforcing. Its activities were meant to show how the two objectives might be reconciled and pursued simultaneously to improve the quality of employment.
The project was implemented experimentally in Bogota, Dar es Salaam and Manila. It was believed that a successful implementation would generate enough interest to facilitate replication in other countries by governments and other agencies. The criteria for selecting the cities were:
strong commitment of central government, municipal authorities and employers' and workers' organizations to the pursuit of the objectives of the project;
a certain degree of organization among informal sector operators;
ongoing, related ILO technical assistance and, preferably, ILO institutional presence;
availability of basic data and prior knowledge on the informal sector.
The present paper provides a conceptual framework for understanding the social security needs of informal sector workers and their dependants and reviews the three main options for meeting these needs.
Finally, the paper identifies the main gaps in our
knowledge and recommends various ways to improve the level and extension
of social protection.
May 1996. George Aryee,
Manager,
Interdepartmental Project on the Urban Informal Sector.
Table of contents
Informal (sector) workers and their dependants
Social insurance for the informal sector
Fostering cost-effective social assistance
Extending and reforming formal social insurance
Experimenting with pilot projects
Working towards an integrated social security policy
Training and galvanizing the social security partners
Developing multidisciplinary advisory services
It is estimated that more than 2 billion -- or about one-third -- people in the world are not covered by any type of formal social security protection, i.e. neither by a contribution-based social insurance scheme nor by tax-financed social assistance. If one takes the number of covered persons as a percentage of the number of persons of working age, it is estimated that in Africa some 90 per cent of the population are without any formal protection whatsoever, while in the more developed parts of the world only about 20 per cent remain outside the scope of social security protection (Jenkins, 1993).
In its standard setting and most of its technical cooperation activities on social security the ILO -- as well as many Ministries of Labour -- have traditionally assumed that all workers would sooner or later end up in large enterprises, or at least in the formal sector. However, the experience in the developing countries -- and more recently also in the developed countries -- has shown quite the contrary. Even in countries with high economic growth more and more workers are in less secure employment, such as the self-employed, the casual and homeworkers. So the extension of formal social security programmes cannot be the simple answer to satisfying the social protection needs of increasing numbers of workers (and their families) outside the formal sector. The most vulnerable groups outside the labour force are disabled and old people who cannot count on family support, who cannot be reached by other social policies and who have not been able to make provisions for their own pension. New institutions and forms of social security will have to be developed to meet the specific social security needs of these various groups.
Within the ILO various studies (Mathew, 1973; Wadhawan, 1989; Guhan, 1994) and technical cooperation projects (ILO, 1989 and 1990) have been undertaken in the past to contribute to the solution of this problem. Most recently, under the ILO interdepartmental project on the urban informal sector, the Social Security Department has started to document and set up social security projects in Bogotá, Dar-es-Salaam and Manila. Seminars on these experiments were held before the end of 1995. In addition, the ILO Social Security Department has written a report for the Indian Government on "Social Protection for the Unorganized Sector", that covers the country as a whole and that will be discussed at a National Seminar in November of this year.
In its first section the paper will examine the main
issues and develop some concepts so as to get a grip on this new area
of social policy-making. It will define what is social security, give
a rough typology of informal sector workers and their dependants and
make an inventory of their social security needs. The second section
of this paper will review three social security options for informal
sector workers and their dependants: specially designed social insurance
schemes, the promotion of cost-effective social assistance as well as
the extension and reform of formal sector social insurance. The paper
will be closed with a discussion of the tasks ahead, i.e. evaluating
existing schemes; experimenting with pilot projects; working towards
an integrated social security policy; training and galvanizing the social
security partners; and developing multidisciplinary advisory services
According to the ILO Income Security Recommendation,
1944 (No. 67) income security schemes should relieve want and prevent
destitution by restoring, up to a reasonable level, income which is
lost by reason of inability to work (including old age) or to obtain
remunerative work or by reason of the death of the breadwinner. Income
security should be organized as far as possible on the basis of compulsory
social insurance, and the provision for needs not covered by compulsory
social insurance should be made by social assistance. In the same vein,
the Medical Care Recommendation, 1944 (No. 69) suggests that medical
care should be provided either through a social insurance medical care
service with supplementary provision by way of social assistance or
through a public medical service. The ILO Social Security (Minimum Standards)
Convention, 1952 (No. 102) identifies the nine areas for social insurance,
i.e. medical care as well as benefits in case of sickness, unemployment,
old-age, employment injury, family circumstances, maternity, invalidity
and widowhood.
Various authors have considered that this definition may be too narrow for the problems faced by developing countries. They have broadened the security concept from the income situation to basic needs in general and they have also widened the range of contingencies. They feel that this is necessary so as to link up traditional social security policies with social and economic policies in general. Getubig for instance defines social security for the developing countries as "any kind of collective measures or activities designed to ensure that members of society meet their basic needs (such as adequate nutrition, shelter, health care and clean water supply), as well as being protected from contingencies (such as illness, disability, death, unemployment and old age) to enable them to maintain a standard of living consistent with social norms".
Drèze and Sen (1991) distinguish two aspects of social security, which they define as the use of social means to prevent deprivation (promote living standards) and vulnerability to deprivation (protect against falling living standards). The focus of social security is to enhance and protect people's capabilities to be adequately nourished, to be comfortably clothed, to avoid escapable morbidity and preventable mortality. According to them, the concentration on income in the poverty literature derives from the fact that a shortage of income is one of the most visible and crucial factors restricting the basic capabilities of many people. In addition to the problem of persistent deprivation, there is also the issue of vulnerability. The average experience of poorer populations understates the precarious nature of their existence, since a certain proportion of them undergo severe -- and often sudden -- dispossession, and the threat of such a thing happening is ever-present in the lives of many more. The decline may result from changes in personal circumstances (such as illness or death of earning members of the family), or from fluctuations in the social surroundings (such as a crop failure, a general recession, or a civil war).
In this paper we define social security as:
(a) the provision of benefits to households and individuals;
(b) through public or collective arrangements;
(c) to protect against low or declining living standards;
(d) arising from a number of basic risks and needs.
The first element in this definition establishes
that people derive individual rights from social security. The second
element defines the social element of social security, i.e. that it
is provided through public or collective arrangements. Drèze and Sen
go as far to say that it is all public action, which they see as action
both for the public and provided by the State and action by
the public, such as NGOs. We have preferred the term collective arrangements,
because it emphasizes the voluntary nature of many social security arrangements
in developing countries. The third element makes it clear that social
security does not include the promotional aspect, but only that of protection.
In addition, it makes the important point that social security is not
only concerned with cash benefits and medical care, but also with benefits
in kind and other basic needs areas such as housing and possibly food
security. The fourth element stresses that contingencies and needs should
not be considered too narrow and include some basic risks and needs.
For the purpose of our definition we use the same nine functions or
risks that EUROSTAT has used for the newest definition on social protection
(Eurostat, 1995), i.e. reimbursement and support in kind for health
care; income maintenance and social support in case of sickness, disability,
old age, death of a family member, family circumstances (pregnancy,
childbirth and adoption, care for children and other family members)
and unemployment; help towards the cost of housing; and social support
for social exclusion not elsewhere classified.
Informal (sector)
workers and their dependants
Social security for the informal sector should first of all cover the informal sector workers (and of course their dependants) who may be able to contribute to their own insurance from their employment income. However, also covered are workers who have informal labour relations with their employers, which often means the absence of written labour contracts. Such informality does not only affect wage-earners and other groups such as homeworkers on the informal sector, but also casual workers who work -- directly or indirectly -- for formal sector enterprises. Finally, some population groups, such as widows, orphans and old people, are neither protected by the employment income of the breadwinner nor by any other family protection; these groups need to be protected by tax-based social assistance.
In principle, informal sector workers are employed in a (micro-) enterprise that has the following characteristics (ILO, 1994):
the owner is personally liable for gains and losses (the enterprise is unincorporated);
absence of full and written accounts; the enterprise has less than ten continuous employees.
But apart from informal enterprises there are also informal labour relations which means the absence of written labour contracts. Such informality does not only affect wage-earners and other groups such as homeworkers in the informal sector, but also casual labourers who work directly or indirectly -- for formal sector enterprises.
All these informal (sector) workers have very different
employment conditions which have a direct impact on their social security
needs and on the way they can organize social security for themselves.
The main characteristics for a typology would be the following:
Urban/rural. Urban informal workers tend to be more heterogeneous, so that it is more difficult to establish associations for social security purposes. Urban workers tend to be more interested in housing than workers in rural areas where there is more space and directly available building material.
Self-employed/wage-earner. Self-employed workers are generally richer and are better organized than wage-earners, with the result that they are better candidates for successfully organizing social security for themselves in cooperatives or other producer organizations.
Resident/transient. Where people are working and living in a fixed place, they are more likely to build up the necessary trust for setting up a social security scheme among themselves. So people working in the street economy of the urban areas or circular migrants in the rural areas are unlikely to be covered by social security.
Regular/casual. Most regular workers in
the formal sector are covered by compulsory social insurance schemes,
but because of non-compliance many regular workers are not covered by
them. Casual workers -- both in the formal and informal sectors -- have
little chance to be protected by compulsory or voluntary social insurance
schemes.
Most formal sector workers can contribute regularly to social security and generally have a long-term planning horizon. Unemployment and/or incapacity is the main risk that they run to lose their earning power. And given their regular earnings and long-term planning horizon, they can put money away for retirement.
This is not the case for informal (sector) workers, who cannot afford to be unemployed and who do not have the regular earnings to finance pensions. They live from one day to the other and are faced with risks and calamities that can throw them into a state of permanent indebtedness. These risks and calamities could be grouped into the following four categories:
calamities (flood, fire, civil unrest and famine);
loss of earning power (disability, ill health, loss of assets);
life-cycle crises (death and marital breakdown);
sudden and large expenditures (hospital, wedding).
So the perceived social security needs by informal sector workers are:
health-care costs (not only to face the large expenditures but also to improve the cost-effectiveness of their current expenditure);
survivors (including funeral costs);
disability;
maternity and child care.
As already noted earlier, perceived social security
needs may also vary according to the type of informal sector workers
and their dependants as well as according to the various risks that
they run. In that perspective, help with housing costs may be a high
priority for urban residents where housing prices are high; social assistance
would be a high priority for old-age pensioners, orphans and widows
who cannot be reached with employment and labour market policies; food
security measures (social assistance) would be appropriate in famine
and civil unrest situations; and finally, crop and productive assets
insurance would be a high priority for the self-employed.
There are three major ways in which social security
can be promoted for informal sector workers and their dependants: through
specially designed social insurance schemes, through social assistance
and through the extension and reform of formal sector social insurance.
Social insurance
for the informal sector
As noted in our definition of social security, it is possible for informal sector workers to set up -- through collective action -- a social insurance scheme covering their priority needs.
In the United Republic of Tanzania for example, about 1,000 market vendors of the Mwanayamala cooperative in Dar-es-Salaam pay a daily rate of Tsh.20-30 for renting the space of their stands. These contributions finance a variety of purposes, such as the following two social benefits. In case of death of a member the cooperative pays Tsh.12,000 for funeral costs. In case of hospitalization, a committee member takes Tsh.3,000 to the hospital, often for food and medicines. In San Salvador about 1,000 vendors of the Central Municipal Market are together in a credit scheme. They contribute a symbolic 1 colon per day (about US$10 per year) in a health fund that reimburses some minor health costs but also the hospitalization costs of members and their family. When someone is hospitalized and the fund cannot pay the bill, all members contribute their share out of their pockets.
In India various social insurance schemes for specific occupational groups and enterprises are administered by the state-owned Life Insurance Company (LIC) and General Insurance Company (GIC). Generally, the Central of State Governments subsidize such schemes. One example is the lump-sum survivor benefits of Rs.5,000 mentioned earlier and to be paid out on the death of the breadwinner. In addition, a LIC group life insurance scheme with life cover of Rs.5,000 for one member of the household will be offered at an annual premium of Rs.70. GIC co-finances and administers health insurance schemes with various informal sector workers' associations, such as the Self Employed Women's Association (SEWA) in Ahmedabad.
The analysis of these and other examples show that there are two fundamental requirements for the setting up of a successful social insurance scheme:
1. the existence of an association based on trust;
2. an administration that is capable of collecting contributions and providing benefits.
There are various types of groups that organize informal sector workers. Some associations or organizations could be directly organized by the informal sector workers themselves, such as producer and employer organizations, cooperatives and credit associations. Or they could use some intermediate carriers such as trade unions, NGOs and private insurance companies.
The activities organized by and for informal sector workers are generally based on a comprehensive concept of development and social security (ILO-SAAT, 1996). Organizations such as NGOs and cooperatives have a good understanding of the particular needs and priorities of their client groups and have developed with them institutions and policies that are quite different from what the government is used to and/or can cope with. This broader concept of social security includes not only the nine contingencies traditionally defined by the ILO, but also preventive steps both in the social and economic field. In the social field NGO action integrates the traditional social security measures with complementary measures in the field of (primary) health care, child care, housing and targeted social action. In the economic field, more security can be achieved through self-help and self-employment, resulting in an enhancement of income and creation of productive assets. This not only helps to reduce, to some extent, the need and cost of conventional social security measures available, but also makes a positive economic impact by enabling the poor to actively participate in and contribute to the economy of the nation.
However, the overall assessment of the NGO-sponsored schemes is that they have so far reached only a very small part of the poor in the unorganized sector. This is so because the schemes are not available in most areas, and when they are available, the poor and especially women have little or no knowledge about them. Most of these schemes are limited to small groups of workers, so that the administration costs are relatively high.
One important implementation and design issue is to define social insurance packages that are affordable and meet the priorities of workers. But there are a number of other issues that need to be analysed so as to establish conditions for replicating and extending such schemes. Some of these issues are:
dependence on the input and charisma of one person or group of persons;
dependence on money from outside for the scheme's long-term financial viability;
an evaluation of the implicit costs and the capacity of the scheme's administrators who are usually not remunerated;
the possibility of pooling resources among different schemes;
the possible link-up with private insurance companies and/or social insurance agencies.
Fostering cost-effective
social assistance
A considerable number of developing countries have set up social assistance schemes that are aimed at people in need, who cannot be reached by policies for productive employment. Such schemes which provide benefits in cash or in kind may apply to wide societal groups such as children, disabled and retired people, or limited to certain occupational groups. The advantage of social assistance benefits is that they can be targeted to those who are most in need, but it requires a sophisticated administration to determine who is really deserving and to make sure that the benefits reach the target population effectively. The size of these schemes depends on the resources, the administrative capacity and the priorities of the countries concerned.
In mid-1995 the Government of India for instance, introduced the National Social Assistance Programme (NSAP) consisting of three cash benefits: a pension of Rs.75 per month for people older than 65 years, with low incomes and generally without relatives; a lump-sum payment of Rs.5,000 for families whose prime income earner dies before the age of 60 years; a payment of Rs.300 per pregnancy up to the first two live births. In Mongolia local "Assistance Councils" provide social assistance benefits in kind, such as winter clothing and boots for children who would otherwise not be able to go to school. They also provide free lunches as well as discounts on rent and fuel costs for the disabled and elderly who either have no family support or have not been able to insure themselves during their working life.
Another form of social assistance concentrates on specific occupational groups. An example of this form is the Indian labour welfare schemes for beedi workers, cine workers and some mineworkers, financed by an earmarked tax. The benefits provided are mainly in kind, such as prevention, health education and health facilities; water and washing supplies; housing and recreational facilities; and family welfare. The advantage of such schemes is that the financing is secure, but the disadvantages can be high administrative costs (because workers may live far from each other), and arbitrary allocation of resources (since members have little impact on the types of benefit provided). There are plans in India to set up labour welfare schemes for construction and agricultural workers as well.
There are various evaluation questions that need to be addressed:
What are the responsibilities of the central and local government levels in the financing, administering and fixing of the social assistance benefits?
What should be the criteria for the means test (income, land, assets) and at what level should eligibility be determined (local government, local community)?
How to design corruption-free delivery mechanisms?
The estimation of the implicit administrative costs incurred by the Government.
To compare the cost-effectiveness of social assistance
in relation to other social policy interventions, such as food for work,
employment guarantee schemes etc.
Extending and
reforming formal social insurance
The main question here is how currently available social security programmes in the formal sector can be extended to all regular workers and -- in as far as possible -- to casual wage and some self-employed workers. As noted earlier, the proportion of formal sector workers is declining in most countries, but in addition there are various reasons of a quantitative and qualitative nature why such extensions have not reached more workers.
To start with, many workers are legally excluded from the scope of social security. The self-employed are often excluded as well as the group of "casual" workers, including seasonal workers in agriculture. Of the 165 countries listed in Social security programs throughout the world (USSSA, 1995) about three-quarters exclude such workers from coverage. Family workers, too, are often outside the scope of social security, as are domestic workers.
Workers may also be excluded from coverage, because they are not eligible to benefits. Many schemes exclude enterprises with less than a prescribed number of workers and/or ignore earnings below a certain limit. So if the person concerned works during the relevant insurance period, but receives only a small wage which is below that set by the prescribed legislation for contribution purposes, such a person will be effectively excluded from the scheme. To extend coverage, the Government of India decided in 1995 to raise the contribution ceiling for the benefits provided by the Employee State Insurance Corporation, i.e. health care, employment injury, sickness, and maternity benefits. In addition, there are plans to lower the threshold for eligibility to the Employees Provident Fund: from enterprises with more than 20 employees to those with more than ten employees, which is likely to increase the coverage from 17 to 25 million workers.
Beyond these limitations of a more quantitative nature, there are also a number of more qualitative obstacles to extension. First and foremost, the administration of social security systems is often unable to deal with the special circumstances of the self-employed and casual wage workers. When formal social insurance is extended to smaller enterprises, each new employer has to be identified, registered, educated and persuaded to comply with all the rules of the scheme in so far as they relate to the registration of existing and new employees and to the mode and timing of the payment of contributions. In the case of casual workers, contributions are difficult to secure, and maintaining up-to-date and correct records is administratively complicated when such persons work intermittently and irregularly for different employers. There is also some conflict with the underlying concept for the receipt of benefits, i.e. that of "replacement" income, in situations where it is not always clear that the income to be replaced can be determined efficiently. Other qualitative obstacles may be that workers have no confidence in the scheme, because of abuse, low-quality benefits or poor management. For various reasons employers may also not comply with the regulations so that many workers remain unprotected.
In most developing countries the social security system is limited to some social insurance schemes for formal sector workers and some social assistance programmes for specific groups in need. What is needed, however, is an integrated social security system that is fully financed and that covers the whole population for the main contingencies. In some countries, such as Colombia, such a policy already exists, because the Social Security Act from 1993 introduces a mandatory contributory and a mandatory subsidized scheme covering the whole population for pensions, medical care and employment injury. The problem in Colombia is that it takes time to implement and fully finance the scheme. One other country, the Republic of South Korea, has been very successful in extending health insurance to the whole population. The goal of universal coverage was achieved in 1989 within about 12 years of the commencement of compulsory medical insurance in 1977 (Park, 1992).
So we are looking out for a social insurance system
where all workers -- from the formal as well as from the informal sector
-- are able to participate on the same conditions. Social insurance
in the formal sector is generally based on compulsory participation,
because this is the best guarantee that workers with good risks support
those with bad risks. However, it cannot be expected from informal sector
workers to join on a compulsory basis. On a transitional basis therefore,
certain informal sector workers may be linked up to the formal social
insurance system though the creation of special windows. Another important
condition for success for such a system is that the transitions between
the various parts of the system is guaranteed, and in particular between
social assistance and social insurance. In other words, people dependent
on social assistance should feel encouraged to join the social insurance
system when their income situation improves.
As noted earlier, the eventual aim of any effort in this area should be to ensure social security for all. But for the time being efforts should concentrate on providing direct support to social security beneficiaries and to strengthening the capacity of the social security partners -- i.e. governments, social partners, NGOs and insurance companies -- to implement social security schemes for the informal sector.
As we have little knowledge about this new area it is important to experiment with new pilot projects and to monitor and evaluate the implementation of existing schemes. It will take considerable time to properly evaluate such projects because little is known in this area. One option for extending social insurance and social assistance cover may be the development of area-based schemes. The advantage of such schemes would be better adaptation to local needs and greater reliance on local administration capacities that can be monitored by the people themselves. Such schemes could be financed by earmarked local taxes and social security contributions and would be applicable to both urban and rural areas.
On the basis of knowledge so acquired, it will be possible to train the various social security partners in the setting up of new schemes and in the various techniques of financial and benefit administration. It would also be useful to disseminate the knowledge acquired through publications, conferences as well as press material and videos aimed at potential beneficiaries and the public at large.
The experience and knowledge gained will also provide
the basis for new multidisciplinary advisory services to be provided
by the ILO. It is clear that social security has to fit into the larger
context of social policy-making and to complement and reinforce other
social policy measures.
A first requirement for any improvement is a thorough documentation and evaluation of the implementation of existing schemes in the three areas of social security, i.e. social insurance financed by informal sector workers themselves, tax-financed social assistance and extending existing formal social insurance schemes. Since health insurance is likely to take an important place in any social security package for informal sector workers, it is important to also evaluate the impact of basic health services as financed and provided by the government.
The outline of such an exercise at the national or
at the project area level would be as follows:
1. Improving access to basic health services
(a) Government-financed supply of services, in terms of:
-- type of services (prevention, promotion, first-, second- and third-level health care);
-- equity (access), efficiency, health status, quality and consumer satisfaction;
-- extent of co-payments (formal and informal).
(b) Additional demand for basic health services, satisfied through:
-- personal incomes (by income group);
-- collective financing mechanisms (formal and
informal social insurance as well as private insurance).
(c) Potential role of formal and informal social
health insurance.
2. Promoting self-financed social insurance
(a) Description of existing schemes, in terms of:
-- types of benefit and sources of finance;
-- eligibility criteria and groups covered;
-- administrative organization (NGOs, trade
unions, cooperatives, etc.).
(b) Evaluation of these schemes, in terms of:
-- financial viability (dependence on outside money?);
-- administrative sustainability (costs per beneficiary, remuneration of administrators).
(c) Role of self-organized social insurance
schemes, in relation to formal social and private insurance schemes.
3. Fostering cost-effective social assistance
(a) Description of existing social assistance programmes, in terms of the following characteristics:
-- types of benefit (in cash or in kind);
-- eligibility (target groups and/or means test; groups and areas covered);
-- administration and source of finance (central/local
government, community, family).
(b) Evaluation of these programmes, in terms of:
-- administrative costs per beneficiary;
-- horizontal (percentage of the poor covered) and vertical efficiency (percentage of the poor covered within the total group of beneficiaries);
-- cost-effectiveness compared to other anti-poverty
programmes, such as employment guarantee schemes and food subsidies
to consumers.
(c) Role of social assistance programmes and
its relation with other anti-poverty measures.
4. Extending formal sector social security
schemes
(a) Description of existing schemes in terms of:
-- types of benefit and sources of contribution;
-- groups covered;
-- administrative organization.
(b) Identifying obstacles to extension, such as:
-- lack of organization among: uncovered regular and casual wage workers; self-employed;
-- quantitative restrictions (contribution ceilings; enterprise size; sectors and occupations);
-- income unknown and fluctuating;
-- high contribution costs and incompatibility with priority needs;
-- mistrust in system (corruption; non-compliance).
(c) Possibilities for reform, such as:
-- making special windows for informal sector workers;
-- more emphasis on health insurance and other
benefits in kind.
Experimenting
with pilot projects
Most of the social insurance schemes for workers in the unorganized sector are organized on an occupational or sectoral basis. While such bases may be good for generating the necessary trust that has to be the foundation of any social insurance scheme, they are less appropriate when it comes to the extension and replication of the scheme. It is therefore proposed to experiment with area-based schemes which have the dual advantage of being more replicable; and more sustainable because it has the backing of the government itself (Jain, 1995).
In the field of social insurance, the pilot projects would be targeted to the majority of workers who are above the poverty line but do not belong to the organized sector with its statutory protection. Such projects would envisage open membership to all adult workers in a defined geographical area, irrespective of the nature and the duration of employment or the place of work. The coverage may be in the individual capacities of the workers, and not on the basis of family units where women workers are usually left out.
The range of benefits that it may be possible to provide would depend on the level of funds available, the contributions of members as well as from other sources. The basic benefits may include: (a) insurance against death or disability; (b) health insurance; and (c) old age benefits. The funding of the scheme under the pilot project is envisaged from the members' contributions as well as from other sources. Contributions would have to be mandatory, but may be prescribed as flat rates (avoiding any linkage with wages as in the case of organized sector schemes). Members may be given the option to select from amongst different premia amounts with corresponding benefit packages worked out on an actuarial basis. Some other possible sources of finance which could be considered by the competent governments, such as flat-rate levies on selected employers; additional taxation or social security cess linked to specific items (such as electricity consumption, clearance of negotiable instruments, motor vehicles, licences, etc.); diversion of current government funds for various social security and health-care schemes which may be integrated into this social insurance package.
The project would be conceived at the area level, the overall responsibility for its formulation and administration resting with the local governments, in collaboration with the centre. As for its implementation, the management of the finances and benefits could be entrusted to a professional insurance agency, while the field administration may be done through the district and/or other local authorities. It would be desirable to use the existing administrative mechanism to the extent possible.
Pilot projects would also be undertaken in social
assistance and with respect to the extension of formal social insurance.
New social assistance pilot projects could be conceived for new target
groups and/or for new contingencies, such as death, old-age, maternity,
widowhood, invalidity and specific family circumstances (large and/or
one-parent-headed families). Experiments could also deal with different
ways of means-testing (income and/or asset criteria; administrative
versus community testing) and modes of payment (cash, postal or bank
order). In the extension of formal social insurance schemes experiments
could be designed in reaching new groups, such as the self-employed
as well as casual and contract labour.
Working towards
an integrated social security policy
The challenge for many developing countries is to design for informal sector workers social security schemes that are effective in protecting against poverty, and that at the same time promote productivity and employment. Workers are generally willing to contribute to social insurance if they feel that they get value for money, if the benefits correspond to their priority needs and if the system that administers the benefits is trustworthy. If these three conditions are fulfilled and workers contribute wholeheartedly to social security systems, there is no problem with labour costs, employment or productivity. With regard to social assistance, the issue is more political and has to do with the overall willingness of society to show solidarity to those who are in most cases unemployable, such as old-age pensioners, widows and incapacitated people.
In most developing countries between 10-30 per cent of the working population and their dependants are covered by formal sector social insurance, mainly in the areas of pensions and health care. Extension and reform of the formal social insurance system could reach roughly another 5-10 per cent of the working population, i.e. most regular and some casual wage workers in the unorganized sector. At the other side of the income scale are the 20-30 per cent of poor households who can only be helped by tax-financed social assistance. But the bulk of the working population (about 50-60 per cent) -- above the poverty line but not eligible for, or not interested in, formal social insurance -- have some contributory power and are interested to contribute to social insurance programmes that are tailored to their needs.
The first requirement is to determine the interaction with other social policies, such as in employment and poverty. With regard to poverty policies, the social assistance schemes should be complementary to other basic social protection policies, such as access to basic health services, employment guarantee schemes and food security policies. It is also important to determine the comparative effectiveness of various social policies. Another important aspect is to ensure that social assistance policies do not provide disincentives for employment or other self-help activities. Finally, it is important to look at the interaction between employment and income-generating activities, such as the provision of credit, and the organization of social insurance schemes.
A second requirement is to design an integrated social
security policy. This will have to be a more flexible policy in which
various options are possible and where different types of workers can
choose different packages of social security benefits. In the social
insurance area this will create new challenges with regard to the compulsion
of social insurance schemes, but these challenges will have to be faced.
Within a new integrated social security policy all social security partners
will have to be involved, i.e. the government and the attached agencies,
the social partners, but also representatives of NGOs, cooperatives
and private insurance companies.
Training and
galvanizing the social security partners
Enthusiasm, good management and planning will to a large extent determine whether the pilot projects and their extension to other areas and situations will be successful and whether an integrated social security policy can be designed. This enthusiasm will have to be fed by well-documented experiences which show that success is possible. Such positive experiences can be disseminated through workshops at various levels and to various partners. Informal sector associations, NGOs, cooperatives and mutual benefits societies would be more interested in the administrative aspects of running small social insurance schemes. Governments, social security agencies and the social partners would be more interested in policy and research seminars.
A special effort will also be made to disseminate
project findings through working papers, articles, books and messages
through the media. The experimentation with pilot projects is scheduled
for the period of two years, after which there will be an overall assessment
of their impact, with recommendations for extensions of elements that
can be replicated on a wider scale. At that point also recommendations
about better coordination between the various ministries and government
agencies will have to be made. Given the little information available
on social protection for informal sector workers, international workshops
will be organized so as to disseminate the experience gained to other
developing countries.
Developing multidisciplinary
advisory services
It is important for the ILO to be able to offer integrated
social policy advice to its members. So, working together with other
technical departments and with colleagues from Multidisciplinary Teams
(MDTs) in the field is a must. The various issues and projects on which
close collaboration has already been established are the following:
Cooperative and small enterprise development
Many cooperatives have set up mutual benefit societies
which often are in health insurance or in loans for social and personal
purposes, such as housing. At the ILO, COOP is particularly active in
French-speaking Africa for which it has written a "Guide pratique
pour les mutuelles de santé en Afrique". ENT/MAN -- in its Dutch-financed
project on "Urban informal sector development support" --
aims to develop a research methodology on social protection in the informal
sector. Within the context of the INTERDEP informal sector project,
two special seminars on social protection were held in Bogotá and Dar-es-Salaam.
A pilot project in Dar-es-Salaam is under way.
Safety and health
As insurance against (curative) health costs is probably the main social security priority for informal sector workers, it is also important to look at the promotional and preventive activities at the workplace. Many informal sector workshops suffer from basic safety and health problems, such as impulsive noise, poor lighting, exposure to excessive heat and sudden changes in the weather, all of which can create acute illness and/or injury. In collaboration with ILO's Safety and Health Branch (SEC/HYG), a book is being edited on "Health protection for informal sector workers", with experiences from Colombia, the Philippines and the United Republic of Tanzania.
If health services are provided by a dispensary close
to the workplace (such as in the DASICO pilot project in Dar-es-Salaam),
the promotional, preventive and curative aspects of health care and
financing can be integrated within one package
Women's organizations
Women should be covered under social security schemes as workers and in their gender roles as mothers and widows. On both the counts, however, the coverage of women is often unsatisfactory. In many cases women remain invisible as independent workers in social security schemes. Moreover, the traditional notions of the family with men as main workers and as heads of households and women as dependants is often applied in the implementation of social security and social assistance schemes. Another important problem relates to the fact that women workers -- more than men -- are in casual employment, with the result that they have to build up a certain contribution history before they are covered again by the scheme of their new employer.
Women have therefore often set up their own organizations
to finance and administer social security benefits. The most well-known
example is the Self-Employed Women's Association (SEWA) in Ahmedabad,
India, which has gradually integrated a large number of home-based women
workers. Various NGOs have often functioned as intervening, facilitating
and support organizations to assist various groups of women (such as
widows) in getting access to various forms of social assistance. In
some South-East Asian countries, such as Indonesia, the Philippines
and Thailand, women cooperatives are setting up social protection schemes,
in collaboration with ILO's MDT in Bangkok (EAMAT) and its Development
Policy Branch (POL/DEV). They have requested actuarial advice as to
how certain schemes could pool their resources.
Standard setting
Most of the existing international labour standards
apply mainly to workers in the formal sector. So more recent instruments
-- the Convention on homeworkers which is currently under discussion,
as well as the proposed Recommendation on small and medium-sized enterprise
-- emphasize the specific social protection needs of informal sector
and the specific institutions that can administer and organize benefits
for them. This work is done in collaboration with ILO's Entrepreneurship
and Management Development (ENT/MAN) and its Conditions of Work and
Welfare Facilities Branch (CONDI/T).
Interagency collaboration
As a follow-up to various UN Conferences (Cairo, Copenhagen and Beijing) an ACC task force has been set up on "Basic social services for all". Within this task force ILO's Planning, Development and Standards Branch (SEC/PDN) will contribute a paper on "Financing basic social services through social security". This and other contributions will serve as guidelines to the UN Resident Coordinators and the various country and subregional advisory teams.
It is envisaged to send out a joint ILO/WHO questionnaire
to national WHO correspondents to collect information on health insurance
schemes organized by informal sector workers.
United States Social Security Administration. 1995. Social Security Programs throughout the world -- 1995 (Washington DC).
Drèze, J. and Sen, A. 1991. "Public action for social security: Foundations and strategy", in E. Ahmad, J. Drèze, J. Hills and A. Sen (eds.): Social security in developing countries (Oxford, Clarendon Press).
Eurostat. 1995. ESSPROS Manual 1995. Volume 1 (Luxembourg; unpublished document).
Getubig, I.P. and Schmidt, S. (eds.) 1992. Rethinking social security. Reaching out to the poor (Kuala Lumpur, United Nations Asian and Pacific Development Centre), Ch. I.
Guhan, S. 1994. "Social Security options for developing countries", in International Labour Review (Geneva, ILO), 133(1), pp. 35-53.
ILO. 1989. Rapport au gouvernement de la République camerounaise sur l'extension de la protection sociale aux populations non salariés (Geneva; unpublished document).
ILO. 1990. Extension de la protection sociale au secteur de l'artisanat au Maroc (Geneva; unpublished document).
ILO. 1994. Informal sector statistics: Coverage and methodologies (Geneva; unpublished document by the Interdepartmental Project on the urban informal sector).
ILO-SAAT. 1996. Social protection for the unorganized sector in India. A report prepared for the UNDP under Technical Support Services-1 (New Delhi; draft).
Jain, S. 1995. Area-based social insurance for the unorganised sector in India (New Delhi, ILO-SAAT; unpublished paper), Oct.
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Mathew, T.I. 1973. "Social security for the rural population. A study of some social services in selected rural areas of India", in International Labour Review (Geneva, ILO), 108(4), pp. 313-328.
Park, T-W. 1992. "Cost-containment measures in the provision of hospital care under social security health care schemes", in Report of the ISSA Regional Meeting for Asia and the Pacific on cost-containment measures applied under social security health care schemes (Geneva, ISSA), Social Security Documentation. Asian and Pacific Series, No. 15.
Wadhawan, S.K. 1989. Social security for workers
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Dar es Salaam
* Inception mission report, G. Aryee,
Dar es Salaam draft seminar report S. Sethuraman and
(23-24 May 1995) R. Hussmanns
Informal sector statistics: Coverage and methodologies
* Dar es Salaam informal sector pilot survey Ngoi
* Dar es Salaam informal sector survey 1995 -- Buberwa et al.
Operational and technical report
Dar es Salaam informal sector survey 1995 --
Interviewer manual
Role of the informal sector: Determinants of
stagnation, growth and transformation
* Coping with informal sector in Dar es Salaam: S.V. Sethuraman
Issues and strategies
Legal and regulatory framework: Nature, impact
and need for reform
* Brief on national policy for micro-enterprise N.B. Mwaduma
and informal sector promotion
* Regulations and legal framework for informal M. Tueros
sector in Dar es Salaam
* Employment relations and labour law in the D. Tagjman
Dar es Salaam informal sector
* Case-study on international labour standards and Corinne Vargha
micro-enterprises promoted by the projects
(Tanzania, August 1992)
Productive resources and markets: Access to financial
services, skill training, technology sources and markets
* Financial services M. Bastianen
* Skill acquisition and training in the informal
sector M.G. Monji
* Marketing and sales capacity in the informal sector
A. Tarimo
* Locational strategies for informal trading and
services Pushpa Pathak
* Disabled informal sector operators L.D. Msigwa
* Report on community-based training for informal C. Lwoga
sector operators in Dar es Salaam (draft)
* A report on business management training for Joel Chadabwa for
ILO/INTERDEP SIDO/SICATA
Working conditions
* A study for the implementation of occupational P.G. Riwa and
health and safety strategies D. Swai
* Improvement of occupational health and safety in D. Swai
the Dar es Salaam informal sector
* Provision of occupational health services for the
P.G. Riwa informal sector -- Training for first aiders and health-care
providers -- A test of strategies
Social protection
* Social protection for the IS: Health-care services A.D. Kiwara
provision and health insurance schemes
* Social protection scheme for informal sector M. Laiser
cooperatives in Dar es Salaam
* Health insurance for the informal sector (policy
paper) A.D. Kiwara
* Social protection for the informal sector: Health-care A.D. Kiwara
services provision and health insurance schemes --
A project report
* Health protection for the informal sector: W. van Ginneken
Pilot projects for Dar es Salaam
Informal sector self-help organizations
* Self-help organizations in the informal sector P. Wenga et al.
of the Dar es Salaam region
* Informal sector clusters C.M.F. Lwoga
* Institutional linkages between trade unions F.A. Parry
and informal sector associations in Ghana
Metro Manila
* The International Labour Organization (ILO) project S. Endaya
on the informal sector in the Philippines:
Report of the preparatory consultancy
* Report on the inception mission to Metro Manila S. Sethuraman,
M. Allal and
R. Hussmanns
* New challenges and opportunities for the informal
sector -- Background notes for the seminar
(28-29 November 1995)
* An overview of ILO interdepartmental activities Joshi
in Metro Manila
* Minutes of the Symposium on new challenges and
opportunities for the informal sector
(28 November 1995)
Informal sector statistics: Coverage
and methodologies
* Urban informal sector survey 1995 -- Interviewer
manual NSO
Legal and regulatory framework: Nature,
impact and need for reform
* Informal sector: Labour law and industrial relations
aspects R. Ofreneo
* Formalization through business registration L.
Roaring
* Process of formalization and informalization Morato
Productive resources and markets: Access
to financial services, skill training,
technology sources and markets
* Subcontracting in Metro Manila: Operations and
perspectives L. Roaring
* A survey of micro-finance institutions R. Chua
* People with disabilities in the urban informal
sector H. Fajardo
* Feasibility study for the establishment of a common SEA consultants
facilities centre in Marikina for footwear and
leather goods manufacturers
* Corporate strategy for the workers' mart V. Rajpal for the
Workers' Fund
* Report on community-based entrepreneurship J. Docot for
and employment promotion for people with "House with no steps"
disabilities in Marikina
* Food sanitation and entrepreneurial skills in the G. Perdigon,
informal sector -- Final report (documentation of L.D. Catral and
the training programme, training manual and B.V. Lopez
recommendations on improvement and replication)
Working conditions
* Snapshot of working conditions in the urban J. Batino
informal sector
* Copperfield: Child workers in shoe manufacturing Trends-MBL, Inc.
activities in Marikina
* Promoting occupational health and safety for Save the Children,
informal sector workers in partnership with Philippines
community volunteer health workers --
Literature review and action research
* Promoting occupational health and safety for Save the Children,
informal sector workers in partnership with Philippines
community volunteer health workers --
Assessment and recommendations
* Improving working conditions in the informal Save the Children,
sector -- Background paper to be presented at Philippines
the November symposium
* Training documentation on promoting occupational Save the Children,
health and safety for informal sector workers in Philippines
partnership with community health workers
* Dummy for an OSH comics
* Terminal report on community-based child- Social development index
care centres for women in the informal
sector (including end-of-project report,
training report, list of participants,
seminar kit)
* Urban poor women as care-giver and Social development index
breadwinner -- A report on the urban poor
women child-care arrangement
Social protection
* Social protection schemes in the R. Clara et al. for the
informal sector Workers' Fund/KMPI
* Final report on: Information drive M. Cruz for
on the SSS, PAG-IBIG and cooperativism the National
among Marikina-based shoe workers Confederation
of Labour
Informal sector self-help organizations
* A study of self-help associations (including G. Llanto et al.
case-studies)
* A survey on self-help associations L. Espinoza
Bogota
* Informe de avance sobre las actividades Carlos Maldonado
relaizadas hasta diciembre de 1995 (4 de diciembre
de 1995)
* Encuesta al sector informal en Santafé de DANE
Botogá -- Manual del encuestador
Informal sector statistics: Coverage
and methodologies
* Informe final de resultados de la encuesta DANE (Departemento
al sector informal en Santafé de Bogotà Administrativo Nacional
de Estadistica)
Legal and regulatory framework: Nature,
impact and need for reform
* Legislacion laboral y sector no estructurado M.E.
Pacheco Restrepo
Working conditions
* La salud ocupacional en el ambito del sector Luis Angel Moreno Diaz
informal urbano -- Una reflexion sobre las
estrategias de intervencion
Social protection
* Seguridad social para el sector informal: Elsa Marcela Hernandez
temas y opciones
* Proteccion social subsidiada en el sistema
general de pensiones
* Los trabajadores informales frente a la Camilo Gonzalez Posso
seguridad social en Colombia
* El regimen subsidiado del sistema general Julieta de Villamil
de seguridad social en salud
* Cambian las condiciones de salud de las Esperanza de Monterroja
personas beneficiarias del plan obligatorio
de salud subsidiado pos-s, afiliados a la
empresa de solidaria de salud, Ecoopsal
* Empresa solidaria de salud Ecoopsal -- Julian Eljach Pacheco
capitacion empresarial y seguridad social
* Formas de seguridad social generadas por la Gilberto Baron
propia poblacion del sector in formal urbano y Lothar Witte
de Bogota
* Estudio de la seguridad social con base Alvaro Suarez Rivera
en los resultados de la encuesta de hogares
* Proteccion social para el sector informal en Silvia Bello Ramos
Satafé de Bogotà
* Sobre las Empresas solidarias de salud ... Ines
Useche de Brill
Informal sector self-help organizations
* Las organicaciones del sector informal M. Julio
Cely Martinez
* Diagnosis of trade union activities with B. Herrera and
regard to IS J. Galindo
* Platform for action for trade unions with
regard to IS by three national and one
city-level union
General
Informal sector statistics: Coverage
and methodologies
* Informal sector survey, objectives and R. Hussmanns
methodologies
* Informal sector data collection -- R. Hussmanns
International standards and national
experiences
* ILO's assistance on methodologies concerning R. Hussmanns
informal sector data collection (international
seminar in Islamabad)
(September 1995)
Role of the informal sector: Determinants
of stagnation, growth and transformation
* The urban informal sector: A note on concept S. Sethuraman
and definition
* Incorporating the informal sector into the P. Bangasser
macroeconomic information base: Some
definitions and conceptual issues
Legal and regulatory framework: Nature,
impact and need for reform
* The applicability in the urban informal M. Ndiaye
sector of international labour Conventions
dealing with basic social rights, child labour
and general principles of occupational safety
and health: An overview
* The applicability of international labour NORMES
standards in the informal sector (C. Schlyter revising and
summarizing Ndiaye),
July 1995
Productive resources and markets: Access
to financial services, skill training,
technology sources and markets
* Economic linkages for promoting the informal sector
P. Bangasser
* Franchising as an integrating approach to the P. Bangasser
informal sector: Some preliminary ideas
* Public services franchising to the informal sector
P. Bangasser
Social protection
* Social security for the informal sector: W. van Ginneken
Issues, options and tasks ahead
Updated by JD. Approved by ER. Last update 1 July 2000