Written by Laura Alfers, Director, Social Protection Programme, and Florian Juergens-Grant, Global Social Protection Advisor, from Women in Informal Employment: Globalizing and Organizing (WIEGO) in collaboration with the FCDO-funded STAAR Facility (Social Protection Technical Assistance, Advice and Resources


In the dynamic sphere of international development, a significant shift has occurred over the past few decades towards harnessing social protection mechanisms as tools for poverty alleviation. From traditional in-kind assistance to cash transfers, and the emergence of more hybrid modalities such as economic inclusion programmes, the development policy landscape has been transformed. However, amidst the spotlight on various forms of social protection, one aspect has remained relatively overshadowed: social insurance.

Social insurance, funded through social contributions from both workers and employers, operates best in environments characterised by widespread formal employment where employment relationships are clear and enforceable. Considering that 89 per cent of total employment in low-income countries and 82 percent in low-middle income countries is in the informal economy, which is characterised by high levels of self-employment, working poverty, and a lack of formalised employment relationships, it's understandable why social insurance has not been a priority on the development agenda.

This is especially true for women working in the informal economy, who are over-represented in vulnerable and low-paying forms of work such as own-account work and contributing family work, thereby facing higher levels of exclusion. The resultant lack of protection against lifecycle risks, in particular regarding maternity, further increases women’s vulnerability and financial insecurity.

The extension of social protection through, for example, universal child and old age grants, is likely to be a key pathway to extending social protection benefits to informal workers and their families. A recent OECD report estimates that in 42 countries around the world, 60 per cent of children and 57 per cent of older people live in households where all workers are informal.

Nevertheless, it is precisely because of this large informal workforce that we must acknowledge the importance of social insurance within the social protection mix. Here are a few reasons why.


Ensuring adequate work-related benefits

The priority for social assistance programmes is to provide a basic level of support to those outside of the labour market (children and older people), and to support those unable to achieve a minimum standard of living due to lack of income. Therefore, the expansion of child benefits and old age grants are to be celebrated. At the same time, it is necessary to recognise that working people require tailored benefits linked to the risks of their working lives, for example unemployment, injury and sickness benefits, maternity benefits, and survivor benefits.

Despite some important exceptions (such as Mongolia’s maternity benefit and South Africa’s Social Relief of Distress Grant for the unemployed), these types of benefits are often grounded in social insurance rather than the social assistance system. Extending coverage to workers in the informal economy might be more efficiently achieved by adapting existing social insurance benefits, rather than creating new ones.

Moreover, for those workers with some contributory capacity, expanding through the social insurance system could lead to higher-level benefits more closely aligned with true income replacement levels compared to benefits provided through social assistance. As a 2023 OECD report reveals, poverty and informality do not correlate perfectly. While many informal workers fall below the poverty line, depending on the region, there are significant numbers categorised as “near poor” and “middle income”, who may be capable to contribute towards social protection.


The potential for sharing risks across sectors and employment types

The informal economy is heterogeneous, encompassing informal workers across various sectors and employment arrangements. Informal workers can be found in the formal sector, the informal sector, and within households, such as domestic workers. They engage in diverse economic relationships, functioning as employees, self-employed individuals, and dependent contractors (e.g., Uber drivers reliant on a single economic unit for income). Their occupations span agriculture, trade, services, and manufacturing.

While this diversity can make the extension of social protection challenging, it also presents an opportunity to reimagine how we finance social protection. A single social insurance fund can derive its financing from multiple sources, including employers, digital platforms, economic actors in sectoral value chains in which informal workers are embedded, the state, and workers themselves. Such thinking mirrors India’s welfare boards, which have recently inspired the creation of a Gig Workers Welfare Board in Rajasthan that derives its financing from digital platforms.

By integrating workers in all types of employment, a truly inclusive social insurance system would be able to broadly distribute risk and share costs fairly between women and men, as well as between better-off and poorer workers, expanding opportunities to further improve the quality of benefits and ensure their affordability and sustainability of financing.


It's what governments are doing anyway

In the vast majority of cases, when governments aim to extend social protection to workers in the informal economy, they typically do so through contributory or insurance-based systems. Examples can be found across Latin America, Africa and Asia.


Moving forward: adapting social insurance to the realities of informality

Informality presents a substantial challenge to social insurance systems - but considering the points outlined above, the international social protection community should not be giving up on these systems. Instead, the focus should be on how to adapt them to suit the realities of informal employment. Adapting systems to the diverse realities of informal workers, making them more inclusive, accessible, affordable, and appropriate, will benefit informal workers and beyond, including carers, part-time workers, and poorer formal workers. There are a number of pathways through which this could be realised.

Firstly, the diversity of incomes in the informal economy must be recognised, and measures put in place to support workers to access work-related benefits even if they are not able to contribute the minimum threshold. This requires closer alignment of the social assistance and social insurance systems, which is not an impossibility. This is evident in the case of that social health insurance systems in countries like Kenya and Indonesia, where the integration social assistance into insurance systems has been achieved for many years by subsidising scheme membership. Examples of making social security more affordable and improving informal workers’ benefits include government top-ups to informal workers’ contributions as seen in Thailand, subsidised tax and social security contributions with monotax schemes like in Uruguay, or crediting caregiving time as contributions, which is a common practice in European and increasingly also Latin American social security systems. Fortunately, any concern that such subsidies may incentivise informality remains questionable.

Secondly, considering that in the majority of low and low-middle income countries, the share of women in informal employment exceeds that of men, it is crucial to ensure that work-related benefits  address women’s needs and cover both wage and self-employed workers. While it is rare that maternity benefits are provided through social assistance, they remain scarce in social insurance schemes. WIEGO’s review of social insurance laws and policies for self-employed workers across 19 Anglophone African countries found that no country provide cash benefits for maternity protection to informal workers. Paternity leave is even less prevalent and, if provided at all, limited to a short period of leave immediately following childbirth, which further reinforces gendered division of labour and care work.

Finally, as with social assistance, we know that accessibility and inclusiveness go beyond financing to encompass issues of design and implementation. Ensuring schemes are accessible and inclusive also means ensuring the structural participation of representative organisations of workers in the informal economy in the design and governance of schemes. While it has been beyond the scope of this post to discuss these critical issues, they deserve greater attention from the research community. 

Social Protection Programmes: 
  • Social insurance
Social Protection Building Blocks: 
  • Policy
    • Coverage
    • Expenditure and financing
  • Programme design
    • Benefits design
Cross-Cutting Areas: 
  • Labour market / employment
    • Informality
  • Global
The views presented here are the author's and not socialprotection.org's