The organisation of social security, a worldwide challenge

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Mies Westerveld and Marius Olivier on how to include workers in, and prevent exit from, social security.

What do labour markets of South Africa and Chile have in common? And how about those in Canada and Sweden? The answer lies in the word ‘formality’. While in the global south the majority of workers earn a living in the informal economy, work in the global north tends to be documented, with labour contracts, labour taxes and labour-related social security. This difference explains the absence of dialogue between ‘south’ and ‘north’ about issues of social security. Social security scientists on both sides of the globe tend to assume that ‘their’ problems are exclusively developed or developing world issues.

However defendable this lack of interchange may be from a historical view, its self-evidence disappears in the light of developments such as the flexibilisation of labour, globalisation and robotics, (a.ka. ‘globotics’) There is, after all, an analogy of the issues countries in both hemispheres are struggling with as regards social security. While ‘south’ faces the fact that social security institutions are mostly organised to serve workers in formal employment – thus excluding the majority of workers – ‘north’ is confronted with a decrease of social security coverage because of the rise of ‘atypical’ work, dependent self-employment and the effects of the ‘sharing’ economy. This observation turns the organisation of social security for workers outside employment into a worldwide instead of a continental challenge.

Before turning to this global challenge, something must be said about the rise of the sharing economy. For workers in the global south this development has not been all bad, as it has brought work opportunities that would otherwise be withheld. But for the labour market as a whole, for the worker looking for fair treatment (pay, protection and so on), but also for governments who want to raise taxes or premiums to finance social security, the sharing economy is troublesome as it has brought work providers that are hard to identify, let alone held accountable. As Jing Li and Li Jianfei, authors of one of the book’s chapters, observe: “The internet platform owners acquire profits far beyond the normal ones (…) Online shop owners or chauffeured taxi drivers (…) are responsible for their own labour risk, which they are hardly able to assume themselves. Therefore, the levy of social security tax against the internet platforms must be put on the agenda.”

The analogy of both challenges – how to include workers in social security, how to prevent exit from social security – has been trigger for this book. The result is a dialogue in which academics from both hemispheres exchange ideas, past experiences and reflections about what might be to come. Summarising the overwhelming amount of material is all but impossible, but a few observations do stand out. The first has to do with the obligatory or voluntary character of social security. In north, one of the assumptions lying at the base of obligatory old age schemes, is the consideration that short-term gain often prevails over long-term precaution. This assumption was underlined recently by an Eastern European experience, where many self-employed took the opportunity that was offered to them to trade a solid contributory old age pension for a cheaper, less trustworthy scheme. On the other hand, experience from ‘south’ shows that social security arrangements do not necessarily have to be mandatory, in order to be a success. In this part of the world, several countries have constructed specially devised contributory schemes, tailored to the context and special needs of informal economy workers, and of a voluntary character. In practice such arrangements have been more successful in attracting informal economy workers than any formal arrangement thus far. Of course, one could question the potential of voluntary schemes to reach the most needy. But in a situation where social protection is all but absent, this observation can hardly be considered a disqualification. Significant scope for feasibility exists where contributions are forthcoming from government or other sources, which may impact positively on the potential of such schemes as a vehicle to also cover poor informal workers.

Both sets of findings justify further research as to the nature of workers opting out of social security arrangements vis-à-vis new entrants who are given the choice to participate or stay out. Is there, in other words, an analogy between workers in the global north who have been opting out of an existing scheme and workers in south who choose to remain outsiders even when given a choice of entry? Perhaps there is no analogy. There are after all more reasons for opting in or staying out, such as a solid, non-corrupt administration as well as trust of the people involved that their investment will be well spent. But the fact that such data are becoming available gives reasons for further study, either confirming or contradicting such assumptions.

Another thesis underlying the book was that in the analysis of the ‘most in need’ category, special attention should be given to the elements race and gender, both on itself and in combination. Unfortunately, this task proved more easily said than done, as such elements are not systematically categorised in all countries. Race especially is absent in many statistics, both in itself and in combination with gender. The fact that this is the case – and the assumption that race may be of importance – implies a task for future data collecting and recording.


Westerveld Social

Mies Westerveld, Faculty of Law, University of Amsterdam, the Netherlands and Marius Olivier, Law School, University of Western Australia, Perth and Faculty of Law, North-West University, South Africa.

The book Social Security Outside the Realm of the Employment Contract is out now.

Read chapter 1 free on Elgaronline.

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