German Development Cooperation (Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ)) in partnership with the World Bank Social Protection and Jobs Global Practice is organizing the Global Learning Lab (GLL) on Enhancing the Role of Social Protection in a Changing World of Work. The event will facilitate discussions among 50-60 policymakers, practitioners, experts, civil society, and development partners. They will have the possibility to share their knowledge on best practices and lessons learnt on the theme of social protection related to informal and self-employment. A field trip will showcase the topic on a practical example on the ground.
The thematic focus of the event will be on the role of social protection in a world in which informality is and likely continues to be the predominant challenge to the ambition of adequate social protection and decent work for all. Global trends, digital transformation in particular, have the potential to drive different modalities of work, increasing the demand for flexibility on the labor market. In order to leave no one behind and to counter these global trends, social protection systems have to reflect the changing realities of the labor market.
Problem Statement and Outlook
The informal economy comprises the largest share of employment globally. The vast majority of people in low- and middle-income countries depend on the informal economy for their livelihoods. In low- and middle-income countries, 70% of all employment is organized informally. In comparison, this figure is at only 18% in high-income countries. The size of the informal sector substantially varies also between regions. With around 25%, it is lowest in Europe and Central Asia, 40% in the Americas, 68% in the Arab states and Asia to 86% in Africa.
Through the increased mobility of individuals within and across borders, migration and forced displacement can lead to a rise of people engaging in the informal economy.
In addition to that, informality also affects women and men differently. Even though globally the male labor force in the informal economy is larger, the majority of women are more exposed. Female informal workers tend to rely on more vulnerable forms of informal employment with fewer hours of paid work. In addition, some face explicit gender-based discrimination through institutions.
The prevailing employment-based risk-sharing policies do not correspond to the diverse and fluid nature of the informal economy in low- and middle-income countries today. This leads to a significant lack of access to or purposeful avoidance of state-financed and/or mandated insurance instruments and the accompanying lack of access to resources to legislated worker protections. But also in high-income countries, where social protection programmes were designed with the presumption of stable jobs and a formal employee-employer contract and a reliance on regular contributions, the stability of work is subject to change, increasing the concern that current risk-sharing policies are losing relevance.
Global drivers of disruption such as technological advances, climate change, globalization, and demographic changes are diversifying labor markets in a way that challenges the prevailing risk-sharing policies. Instability in the labor market increases as self-employment, temporary, or seasonal wage labor becomes even more dominant. Particularly, digital transformation bears the tendency of increasing the number of workers in the gig economy that relies on temporary positions or short-term engagements (so-called ‘gigs’) of independent workers.
But digital transformation also holds a strong potential for societies. The ever-increasing interconnectedness between the society and technology enables the more efficient and effective identification of beneficiaries and delivery of services. It can support the tax revenue creation as well as decrease barriers for participating in the formal economy.