Social protection and the informal economy Koen Rossel-Cambier, Social Protection Programme

ILO objective on Social Protection Enhance the coverage and effectiveness of the Social Protection for ALL

Long-termpermanentdisability Temporarydisability Survivors Short-termbenefits Family allowances Long-termbenefits Employment injury benefits Maternity Sickness Pensions Invalidity Survivors Old-age Unemploymentbenefits CONVENTION No. 102 Medical care

Why social protection? lMinimum 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 lA 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 Availability of income maintenance benefits

Direct transfers from public budgets funded by the tax system Contributions from employers and employees Income derived from saving accumulated over a working life RESOURCES NEEDED

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 SYSTEM A universal tier An employment- related social security tier A complementary tier Financed byProvide A range of income maintenance benefits and health care services Additional cash benefits and health care services Employers’ and employees' contributions Supplementary employment- related schemes on voluntary or compulsory basis Individual savings Flat-rate benefits and basic health services Annual basis from taxation

Present Situation lglobalization and flexibility of labour markets l80% of world population insufficient coverage l50% of world population – no SP lmajority of those in developing countries lmajority of those in informal economy lparticularly women

Group of non-covered lSelf-employed, in small and medium size enterprises and growing informal economy, rural and urban areas lUnpaid family labour, mainly in agriculture lDisabled persons lCasual and intermittent workers lWomen workers, mainly domestic workers.

Reasons for low coverage lConventional social security use the employer/employee relationship as a basis for coverage lLow and irregular income of informal economy workers reduce their capacity to make contribution lIgnorance of social security rights and obligations lLegislative requirements, particularly those concerning employment status, exclude some informal sector workers from participation lBureaucracy lgeographic accessibility of social protection institutions

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

Redistribution A Vicious Cycle Income Poverty Ill Health, Malnutrition High Fertility Food Security Household caring practices Female illiteracy Access to water sanitation, low access to preventive and basic curative care etc Health care is a high proportion of health expenditures Catastrophic illnesses increase economic vulnerability Loss of wages, economic opportunities Poverty

Strategies for Extending SP lVertical extension: –Social security services –HIV/AIDS –OSH –Quality and access lHorizontal 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 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 NATIONAL SOCIAL PROTECTION SYSTEM NATIONAL SOCIAL PROTECTION SYSTEM Family benefits Health care Others Universal schemes Social assistance Social care Income support Others Social insurance Pensions Short-term benefits Health insurance Others Occupational pensions Private health insurance Others Private schemes

Social health insurance UNIVERSAL SERVICES UNIVERSAL SERVICES SOCIAL ASSISTANCE Micro-insurance Defined by law Public / semi- public Contributions Amongst contributo rs Defined by MIS Private Workers and families Contributions workers and employers all Taxes Redistribution to poor Defined by law Only for defined categories / law or private PublicPublic / NGOs Four approaches Financing Administration Services Coverage

Group work 1. The lawyers of the extension of social protection in health lEach group defends a different approach for the extension of social protection : –HMIS –Universal benefits –Social health insurance –Social Assistance –Private insurance lA lawyer of each group tries to find the inconveniences of the other approach and defends its own approach lA committee of judges will make a final judgement

HMISSocial Assistance Social health insurance Private insurance Universal coverage Avantages -Solidarity -Based on needs -Participatio n 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 Disadvant ages -Limited resources and benefits -Limited risk pooling -Limited access to public funds -expensive -managemen t -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 lThe achievers: South Korea and Costa Rica (political commitment, public expenditure and formal labour force). lStriving for universal coverage: Colombia and Tunisia (fast-track versus gradualist; effective design and organization; constitutional commitment). lPolicy 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 lEfficient solution to immediate needs lHow to up-scale: training in design and management; monitoring and regulation; co-financing arrangements; re-insurance. lExperiment with area-based (health) insurance schemes, (district level in India)

Dealing with health care can be fun!

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: lExtend statutory schemes lImprove governance and design lNew schemes for uncovered groups lCommunity- or district-based schemes lWorking together with actors and institutions.

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 Project 4. Strengthening community-based social security schemes 5. Extending health care coverage in Latin America and the Caribbean 6. The Africa initiative 7. Training programme on the extension of social protection

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