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It’s time to act

Chapter Sections

  • An important but unmet aspiration
  • The problem of informal work
  • A system built for one kind of work
  • Diverse working defined

It’s time to act

Given the implications for individuals if it fails, social protection is widely recognised as an important responsibility of states. Several key UN treaties, including the Universal Declaration of Human Rights, describe it as a right, and international organisations and many countries are comfortable with using the language of rights for social protection – from Japan’s 1947 constitution to last year’s European Pillar of Social Rights.

An important but unmet aspiration

Calling social protection a right emphasises its importance: everyone in need should have a social safety net. In today’s developed societies, the question is not whether basic resources exist – they do. Instead, the questions are: what is an appropriate level of protection? And how do authorities implement it effectively?

The first of these is a political decision, which inevitably varies across different countries. This report is most interested in the second – a practical matter of policy execution that is often unnecessarily flawed.

Even in developed countries, some social protections are not universal. In the EU,for example, a 2015 study found that about 13% of all workers were at risk of not receiving unemployment insurance if they lost their jobs, and 8% would not receive sickness benefit if they became too ill to work.1 In South Korea, meanwhile – where there is a constitutionally enshrined right to social protection – just 53% of workers were covered by unemployment insurance in 2016.2 And a recent Asian Development Bank study found that in Japan only 77% of potential beneficiaries of contributory social insurance schemes – including pensions and unemployment and disability protection – actually received any payments.3

The problem of informal work

Most countries have social protection arrangements for formal employment relationships, which excludes those in informal work.

Informal work makes up a substantial part of GDP: a 2015 analysis found that 12% of German and French economic activity, and 10% in Canada, involved otherwise legal activities kept hidden from the tax authorities.4

The social protection implications are complex. This kind of work creates a class of highly vulnerable individuals in low-paid, informal employment – the people who are most in need of social protection – with limited or no access to a safety net.

But this is not the only problem. In the US, for instance, the Enterprising and Informal Work Activities Survey found that in the second half of 2015 36% of US adults had done at least some informal work. The proportion with a total family income of more than $100,000 per year from all sources (30%) was markedly higher than those with family income under $25,000 (18%).5 Those in the lower income group need more effective social protection, and the higher earners should be paying their fair share to such schemes. Informal work stops both from happening.

A system built for one kind of work

Christina Behrendt, Head of the ILO’s Social Policy Unit, says that challenges are often engrained in national legal frameworks: “Some countries simply don’t provide for the self-employed, or have minimum thresholds in their legislation which exclude some people in part-time work, or do not cover people who have a temporary contract that lasts less than a set time.”

Self-employed workers face particular challenges. In principle, they have a high degree of freedom – but also the responsibility – to arrange their social protection as they see fit. But with freelancers no longer being exclusively high-earning professionals, questions arise on the limits of this system. In the Netherlands, the government has indicated that it will start using two systems: one for the self- employed with an hourly rate below a certain threshold, and another for those above the threshold.6

In the EU, the majority of those at risk of missing out on unemployment or sickness benefits are self-employed, while most of the rest are temporary workers whose contributions are too low to trigger support.7 This is no longer good enough, says Cécile Jolly, Head of Projects on Work and Employment at France Stratégie – a think tank attached to the office of the French prime minister. “We have to design social protection for all ‘vulnerable’ workers, whether they are self-employed or salaried.”

Some countries have started to make changes. Singapore’s government has committed to implementing the recommendations of a 2018 report of a work group made up of government officials, union leaders and employers on challenges facing the self-employed – including in areas of social protection.8 And a 2017 EU study found that in recent years 14 European states have made substantial reforms aimed at improving some aspect of social protection for the self-employed.9 However, the same report complained of the high degree of differentiation in protection for those with different employment statuses.

Other major economies are seeing little change. The US social security system, says David Autor, Ford Professor of Economics at Massachusetts Institute of Technology, “is less generous and more fractured. Much of it is also much more antiquated than in many other developed countries: the programmes that do exist are there because they’ve been around for a long time. They’re not typically rethought or improved, and aren’t retuned for how things are changing..”