Introduction

CHAPTER 8

Social Insurance among Informal Workers in South Asia

GUSTAVO DEMARCO, ERNESTO BRODERSOHN, MIGLENA ABELS, CLÉMENT JOUBERT, AND EMILIO BASAVILBASO

Most workers in advanced countries and workers in the formal sector in South Asia have access to pension benefits and other forms of social insurance to protect against sudden reductions in income and to provide support after retirement or in the event of loss of income because of other social risks (annex 8A). However, most South Asian workers are in the informal sector, and most informal sector workers lack good access to social insurance and face various uninsured or poorly insured risks, including illness, temporary unemployment, and income loss if they can no longer work.1 In the region, 95 percent of the labor force does not have any form of pension, the highest rate among low- and middle-income regions, together with Sub-Saharan Africa (figure 8.1). This chapter focuses on the potential for expanding access to pensions among informal sector workers in South Asia. Because international experience shows that the possibility of reducing informality is limited, the analysis explores the potential for extending social insurance to workers who remain informal.

The most common approach to improving access is to expand existing contributory social insurance schemes to reach more workers. However, the results in most countries worldwide have been disappointing (Palacios and Robalino 2020). Reducing the size of the informal sector so more workers can be subject to payroll taxes to finance social insurance through improvements in records, administration, and compliance enforcement has had