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ADDRESSING THE COVERAGE GAP IN INFORMAL LABOUR MARKETS

CONCURRENT SESSION 2.1. ADDRESSING THE COVERAGE GAP IN INFORMAL LABOUR MARKETS. FOUR SPEAKERS. Marty Chen , Harvard University, USA and WIEGO network - O verview Elias Baruti , Local Authorities Provident Fund, United Republic of Tanzania - Tanzania

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ADDRESSING THE COVERAGE GAP IN INFORMAL LABOUR MARKETS

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  1. CONCURRENT SESSION 2.1 ADDRESSING THE COVERAGE GAPIN INFORMAL LABOUR MARKETS

  2. FOUR SPEAKERS • Marty Chen, Harvard University, USA and WIEGO network - Overview • Elias Baruti, Local Authorities Provident Fund, United Republic of Tanzania - Tanzania • Andrew Pienkos, National Insurance Board, Trinidad and Tobago - Trinidad and Tobago • Bapu Ramesh, V.V. Giri National Labour Institute - India

  3. MY PRESENTATION THE COVERAGE GAP IN INFORMAL LABOUR MARKETS: HOW TO DEFINE, MEASURE, AND UNDERSTAND IT

  4. TWO PARTS • Informal Labour Markets: Expanded Definition, Recent Data, and New Understanding • The Coverage Gap: How to Define, Measure and Understand It

  5. INFORMAL EMPLOYMENT • Self-employment in informal enterprises: workers in small unregistered or unincorporated enterprises, including: • employers • own account operators • unpaid family workers • Wage employment in informal jobs: workers without legal protection for formal or informal firms, for households, or with no fixed employer, including: • employees of informal enterprises and formal enterprises • other informal wage workers such as: • casual or day labourers • domestic workers • contract workers • industrial outworkers (also called homeworkers) Notes: # 1 - The international statistical definition of the “informal sector” adopted in 1993 by the International Conference of Labour Statisticians includes only those who work in informal enterprises (highlighted in bold above). # 2 – The expanded definition of “informal employment” endorsed by the 2002 International Labour Conference and the 2003 International Conference of Labour Statisticians includes both self-employment in informal enterprises and wage employment in informal jobs.

  6. INFORMAL WORKFORCEIN DEVELOPING COUNTIRES Share of non-agricultural employment: 50-75% Sub-Saharan Africa 72% Asia 65% Latin America 51% North Africa 48% Share of total employment: 60-90% Ghana 90% India 93% Mexico 62%

  7. SEGMENTATION OF INFORMAL EMPLOYMENT: BY SEX, AVERAGE EARNINGS, AND POVERTY RISK

  8. NON-STANDARD EMPLOYMENTIN DEVELOPED COUNTRIES • “non-standard” employment in the developed world is often “informal” (i.e. not covered by social security) • three categories of non-standard work in developed countries – temporary, part-time, and self-employment – are significant and growing: in the EU as a whole in the late 1990s • temporary employment: about 10% of total employment • part-time work: about 16% of total employment • own account work: about 11% of male employment + 7% of female employment • other categories of non-standard wage work in developed countries are even more likely to be informal/unprotected – namely, casual day labour, industrial outwork, and other kinds of contract work Source: Carre 2000

  9. THE COVERAGE GAP:HOW TO DEFINE IT • extent of coverage: number of workers + type of workers • nature of coverage: type of scheme + contingencies covered • cost-benefits of coverage: benefits + contributions

  10. SOCIAL SECURITY AND INFORMAL LABOUR MARKETS: STATUTORY SYSTEMS • formal system: in most developing countries, covers only 5-20% of total labour force • universal system for all workers: growing number of country-specific models • alternative schemes for informal workers: many countries with a patchwork of small schemes • safety nets for informal workers: growing number of countries since financial/economic crises of late 1990s

  11. SOCIAL SECURITY AND INFORMAL LABOUR MARKETS: PRIVATE SYSTEMS • commercial systems: often too expensive for the working poor in the informal economy • NGO systems: mostly pilot schemes with low coverage • mutual systems: very region-specific with low coverage • traditional “informal” systems: specific contingencies and declining coverage

  12. THE COVERAGE GAP:HOW TO MEASURE IT • administrative data which show what percentage of labour force covered and/or what categories of workers covered • labour force data which include social security coverage of different categories of workers • cost-benefit analysis of different schemes available to different categories of workers, including contributions by different stakeholders, contingencies covered, and benefits available

  13. Coverage of Formal Pension Systems in South Asia,Latest Year Available, Preliminary Data (in %)

  14. THE COVERAGE GAP:HOW TO UNDERSTAND IT Two Related Questions: • which social security schemes are designed to cover which categories of informal workers? • which categories of informal workers have access to which social security schemes in practice?

  15. MEASURING AND UNDERSTANDING THE COVERAGE GAP:USING VALUE CHAIN ANALYSIS Horticulture Sector in Chile 1. Continuum of Employment Arrangements Permanent workforce (small core) Temporary or seasonal workers Casual workers - for short periods or on a daily basis Contract labourers – employed by a third party labour contractor Smallholder producers 2. Social Security Coverage percent contributing to a pension plan: permanent workers – 52% temporary workers – 33% other workers – 0%

  16. MEASURING AND UNDERSTANDING THE COVERAGE GAP:USING VALUE CHAIN ANALYSIS Garment Sector in Thailand 1. Continuum of Employment Arrangements Formal workforce in factories (small core) Agency workers in factories – supplied by a third party contracting company Industrial outworkers in small workshops or at home – sub-contracted to a third party contractor 2. Social Protection Coverage Formal workers – employer contributions to social insurance + full package of worker benefits Agency workers – employer contributions to social insurance + sick leave with hospital certification Industrial outworkers – no employer contributions to social insurance + no worker benefits

  17. CONCLUSION:LARGE AND GROWING COVERAGE GAP • share of informal or non-standard employment in total employment: • developing countries: 60-90 % • developed countries: 25-40 % • informality is expanding: • both old forms + new forms • both self-employment + wage employment • in both developing + developed countries • informality is expanding: under conditions of both - • labour market regulation + de-regulation • economic growth + stagnation + crisis

  18. RECOMMENDATION:NEED TO REDUCE THE COVERAGE GAP Reducing the social security coverage gap in informal labour markets: • is key to reducing vulnerability, poverty, and inequality • will require a context-specific mix of statutory and private systems • will require collective action and contributions by all stakeholders

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