Extending social security coverage to workers in the informal economy is a daunting and formidable challenge. While some countries are making important inroads into this long-standing coverage gap, the continued growing number of workers in the informal economy makes it an even more urgent priority.
While there are social assistance programmes for workers in the informal economy who are extremely poor, there are those who are not “poor enough” by virtue of their work and are thus not eligible for coverage. Nonetheless, they do not earn enough to contribute to regular programmes. Their limited contributory capacity as well as administrative complexities to access social security services often preclude their inclusion in regular contributory programmes for formal sector employees and the self-employed.
These workers in the informal economy are caught in the middle of not being poor enough and not earning enough, the so-called “missing middle”. Among these count low-income self-employed workers, casual workers in construction or in sweatshops, low qualified migrants, rural workers and the proprietors of very small businesses such as market vendors. Especially in countries where the informal economy occupies the preponderant share of the labour force, the ”missing middle” represents a huge population group whose exclusion from the social security system exacerbates a country’s risk of rising poverty levels.
This part of the ISSA Guidelines on Administrative Solutions for Coverage Extension provides guidance on how the social security coverage of the “missing middle” may be improved. It draws from the experiences of countries that have achieved progress in covering this vulnerable group, including initiatives to formalize the businesses and sources of livelihood of informal workers. Simplifying administrative processes, subsidizing contributions, and developing tailored communication approaches are important success factors to extend social security to this difficult-to-cover group. Coordination with other public entities such as tax administrators is crucial for one-stop-shop services that facilitate the registration, identification and formalization of the “missing middle”.
Taking into consideration country specificities and regional diversities, strategies to cover the missing middle are defined in the context of a country’s social security system. The existence of programmes that facilitate the transition of informal workers from social assistance to regular contributory schemes is a key enabling factor as well as policies that support the funding and sustainability of these programmes. National support for these strategies is indispensable.