Well-structured and administered social protection programs are both financially feasible and socially and economically beneficial.
They are street vendors, home-based workers, small business operators, and a host of other occupations and they make up about 60% of Asia’s total labor force; up to 90% in some countries.
Yet informal workers largely exist in the shadows of the formal economy, living for the most part without access to health insurance, pension schemes, unemployment benefits, or other forms of social protection. In many cases, they can be one accident, family death, or illness away from falling back into poverty.
Reaching the informal workforce with social protection programs is often regarded as too costly and complex for governments managing limited resources, political pressures, and election cycles.
But a recent Asian Development Bank publication, Social Protection for Informal Workers in Asia, argues that well-structured, well-administered programs are financially feasible and provide multiple benefits both for individual workers and wider society.
Designing effective social protection programs
The book examines the elements that make up a successful social protection system and provides case studies from Bangladesh, the People’s Republic of China, India, Indonesia, Pakistan, the Philippines, and Thailand.
“With good governance, coordinated systems and political will, better social protection programs can be created that are equitable and inclusive for both employers and informal workers in the region,” the book notes.
Around 80% of all micro, small and medium-sized enterprises in developing countries are informal, with South Asia, East Asia, and Pacific Island countries having the highest number.
“With good governance, coordinated systems and political will, better social protection programs can be created that are equitable and inclusive for both employers and informal workers in the region.”
Informal sector workers are often vulnerable and invisible, carrying out hazardous jobs under poor working conditions.
With a vast range of worker and business types, skill levels, incomes and locations, governments face major hurdles in reaching all workers and designing effective protection programs for them. Governments also need to ensure programs are fiscally and administratively sustainable over the long term.
Coordinate policy, program, administration
While there is no “one size fits all” template for successful social protection systems, there are common elements that can improve outcomes:
- Detailed and frequent monitoring and evaluation to guide implementation of programs.
- Close coordination of systems at the policy, program, and administrative levels.
- Adoption of a single registry management information system to improve benefit targeting and increase the effectiveness of programs.
- Innovative outreach activities to improve access to services for all target groups.
- Strong governance and coordination among government ministries to improve delivery of services and avoid overlap.
- Benefit portability to extend coverage to migrant workers employed outside their home countries.
The book notes that in the majority of 20 countries sampled, providing a basic level of social protection for all appears affordable without causing high levels of taxation. In fact, major gaps in protection for the informal sector can be closed at a cost equivalent to just 2% to 3% of a country’s gross domestic product.
To do this requires a combination of reallocating existing budget spending, improving tax collection, and in some cases increasing taxes.
Benefits for individuals and society
The advantages of comprehensive social protection extend well beyond reducing economic vulnerability for individuals.
Giving workers protection from unseen events, including sickness and job losses, helps preserve household savings that can then be spent in the broader economy. Expanding economic activity in the informal sector helps generate demand and supports entrepreneurship.
Social protection programs can also help increase workers’ access to credit, education, technology, and new markets for their goods and services.
And as informal sector workers come under the umbrella of the formal workforce and pay taxes, the burden of financing social protection is reduced.
The publication notes that beyond these economic benefits, comprehensive social protection coverage also helps countries achieve broader development objectives, such as equity and social inclusion.Stay up to date Subscribe to our newsletter and get the latest issues, news, events, jobs and data in your e-mail inbox.