Challenges for social protection in the informal economy

Workers in the informal economy are not recognized, registered, regulated or protected under labour legislation. Most workers in the informal economy have little or no social protection and receive little or no social security, either from their employer or from government. Informal workers are exposed to the worst living conditions with almost no social protection.

This is the challenge of informal economy that creates the vicious cycle of poor job quality leading to low income resulting the poor working environment. Workers and economic units in the informal economy are characterized by poverty, powerlessness, exclusion and vulnerability. They have limited or no access to judicial system, public benefit, skill development opportunities and credit facilities. It is necessary to eliminate the negative aspects while at the same time ensuring the opportunities for livelihood and promoting the protection of workers in the informal economy into the mainstream of economy. Since the number of workers involved in the informal economy is staggeringly enormous, it has been beyond the means of the government to provide social security coverage. Once the decent work deficits social protection also deficit. It's a big challenge for government as well as other concerned social partners. The 90th session of the International Labor Conference has provided recommendations for undertaking measures for meeting those challenges of decent work deficit in the informal economy.

Social protection strategies for the informal economy

Extending social protection coverage to the vast number of workers engaged in the informal sector is seen as beyond the available resources but it is the important aspect of the strategy. A comprehensive strategy to meet the needs and aspirations of those working in the informal economy must seek to maximize their employment potential and improve the coverage of provisions under social protection. This broad framework can be useful to highlight four specific objectives that are of particular significance to those working in the informal economy and at the same time these are useful to seek to address the contingencies and hardships applying to all sections of the workforce.

Improvement of the productive potential and of employment and income generating capacity of the informal sector

Improvement in the welfare situation of the poorest groups of the society

Establishment of appropriate forms of social protection and regulation.

Organizing the informal sector producers and workers in the form of trade unions, micro producers association and co-operatives.

The workers in the informal economy need a wide range of protective as well as promotional provisions. Protective provision includes the schemes by which the government provides the means of livelihood when a person is not able to work due to certain contingencies or risk. Protective measures of social security have been designed primarily for workers in the formal economy. Employment injury benefit, sickness benefit, maternity benefit, old age benefit and family benefit are some example of social security which is implemented generally in organized sector of formal economy. Promotional provisions consist mainly of employment, training, nutrition, sanitation and income generation. By means of this social protection, person is able to work and earn a livelihood. This wider range of promotional components of social protection addresses the informal economy in the real sense.

On the one side a large proportion of Nepal's workforce is totally reliant on the informal economy and on the other side the workers in the informal economy face a much higher vulnerability and insecurity. Agricultural workers, former Kamaiyas, construction workers, domestic servants, street venders, home based workers and porters are all belongs to informal economy. Micro enterprises, family based units and establishments with less than ten workers has been uncovered by formal economy. His Majesty's Government of Nepal has made different social security provisions for salary bearers in public sector. But the beneficiaries are nominal as it is compared to total workforce. The labor Act 1992 makes a number of social security provisions for wage earners in formal private sector enterprises that employ more than ten people. Old age provident fund and voluntary retirement gratuity are provided to them. In case of work injury, benefits have been provided as full medical expenses under certification of Doctor plus paid leaves in case of hospitalization but half paid leaves if not hospitalized. Salary of three years to the nearest family member and priority in employment to one of the family member is the benefit of life long invalidity. Accordingly they have got the maternity benefit, sickness benefit and medicure facilities. But those beneficiaries are less than four percent of total work force in Nepal.

Universal access to social protection is highly desirable. But the straightforward expansion of existing social protection system is often complicated by variety of social, economic and political factors.

Situation varies with political scenario of the nation. No single model of social protection can benefit everyone in every situation. The social and economic conditions of workers in the informal sector are extremely diverse. So the social protection measures have to be formulated accordingly. One common thing of workers in the informal economy of Nepal is vulnerability. Social protection activities, targeted at vulnerable groups might be more effective. Only the government machinery will be insufficient to gear up the social protection schemes in the informal economy. Along with government, community based organization and non-government bodies can play role in support of the development of social protection schemes. Trade unions can fit themselves with vital roles of coordinating their efforts that will reach out the social protection more effectively to workers in the informal economy.

Financing of social protection schemes and delivery of social protection means are issues of concern. Financing is carried out for the most part through combination of fees, grants and government subsidies. From the angle of delivery, the government can facilitate social protection access through direct intervention or through a facilitative role allowing other role players' participation at multiple levels. Government has worked on the issue of land resettlement, however the effective land reforms are yet to be implemented. Allowance for senior citizen, helpless and widowed women have been made in the national annual budget. Some imitation has been taken by local government for social protection of the working community but it differs from place to place. Social assistance to needy persons in the case of calamities like floods, landslides or earthquakes has been extended by District Development Committees and other local authorities. In fact the state has priority role in the facilitation, promotion and extension of social protection. Social protection has been considered to be an indispensable part of government social policy. Government should provide a broad and responsible role. Other social partners have a strong role to play in the management of social protection with coordinated efforts.

Community based organizations have managerial and financial expertise in developing social protection mechanism. Traditional mechanisms for the exchange of agricultural labour and food assistance prevail in the society. Dharmabhakari, dhikur, paincho and other different types of indigenous social protection mechanism is in practice as a custom. But the prevailing mechanism is absolutely insufficient to undertake the social protection for all with new concept. So the roles should be revised and practice should be in support of developing social protection schemes that will reach out to workers in the informal economy. So it is necessary to trace out the list of workers in the informal economy. Most of the carpenters, plumbers, mechanics, blacksmith, electricians, shopkeepers, tailors, painters, rickshaw puller, driver, hawkers, barber, butcher and many other workers belong to informal economy in Nepal. Major portion of agricultural workers are of informal economy. Yet their social protection could not be addressed adequately.

In order to encompass the workers of informal economy under the umbrella of social protection, immediate implementation of integrated social security scheme is necessary. For this, the government should start the policy of workers' registration at local level authorities. Once the workers of the informal economy come in the track of official registration, the procedure of creating contributory fund combined with tax-based welfare fund is possible. The proposed integrated social security fund will be contributed by government, employer and workers with ratio of 2.5: 2.5:1 respectively at national level. As well as, for the proper management of this fund, a tripartite body should be formed that represent all three contributors of the fund. Policies should be formulated to deliver the funds in different sectors that it will support the social justice and promote human right.

The actors must not forget the fact that lack of social protection is a critical aspect in Nepal. Due to low and irregular income and absence of employment, it is difficult for informal workers to make regular contributions to social security schemes. By extending social insurance schemes and encouraging informal sector system, ways can be find out for social protection. The ILO advocates social protection measures for informal workers through supporting innovative community-based support system as micro insurance for health or accident. Special attention is given by the ILO to protect informal workers through HIV/AIDS programme and occupational safety and health.

Recommendations

The ILO should encourage for awareness raising on social protection issues with particular emphasis on existing informal economy.

The government should introduce a coordination mechanism for social protection amongst all concerned ministries and decentralize social protection systems as well to ratify the ILOs' Convention No. 102 in this respect. Likewise, government should immediately formulate a separate legislation for the protection and promotion of informal workers.

Employers' organizations should enhance mechanisms for social protection in different sectors.

Trade unions should lobby government and employers' organizations to undertake new initiatives for social protection and establish workers co-operatives and self help groups. As well, trade unions should lobby and pressurize government for ratifying ILO Convention No. 102 and formulation of separate legislation for informal workers.

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