Extending Social Protection to the Informal Sector in Argentina. F. Boele D.Kim M. Lamela D. Mase E. Zeballos

Transcription

1 Extending Social Protection to the Informal Sector in Argentina F. Boele D.Kim M. Lamela D. Mase E. Zeballos

2 Real GDP Growth Rate Unemployment Rate Unemployment rose modestly during the FIGURE 1 ARGENTINA: URBAN UNEMPLOYMENT RATE AND REAL GDP GROWTH RATE, BY QUARTER, a/ (percentages) 4 crisis Real GDP Growth Rate (quarter-to-quarter changes) Unemployment rate Source: INDEC. Real GDP data are seasonally adjusted; unemployment rate data are not seasonally adjusted. -1 a/urban unemployment rate refers to Argentina's 28 main agglomerations during QI-QII After that period, urban unemployment rate refers to Argentina's 31 main agglomerations.

3 Employment declined in formal salary jobs 4.5 FIGURE 2 ARGENTINA: REGISTERED EMPLOYEE HIRING AND SEPARATION IN THE PRIVATE SECTOR, BY QUARTER, (percentage of total employment) New Employee Hiring Rate Registered Employee Seperation Rate Source : Ministerio de Trabajo Empleo y Seguridad Social ( MTEySS), Encuesta de Indicadores Laborales. Data are not seasonally adjusted. Covers 31 urban agglomerations.

4 Source: INDEC Encuesta Permanente de Hogares. Data are not seasonally adjusted. Urban underemployment has increased considerably 12 FIGURE 3 ARGENTINA: TIME-RELATED UNDEREMPLOYMENT, QIII-2006 QIV-2009 (Percentage of economically active population) Urban Underemployed Not Seeking Work Urban Underemployed Seeking Work Total Urban Underemployment Rate

5 AFTER INCREASING SIGNIFICANTLY DURING THE 80 s AND 90 s, THE LEVEL OF INFORMAL EMPLOYMENT HAS FALLEN SINCE 2003

6 Informal workers according to occupational category and type of productive unit Self-employed 26% Salaried workers in formal units 30% Employers 1% Domestic workers 18% Family workers without salary 2% Salaried workers in informal units 17% Salaried workers in unspecified workers 6% Source: EPH, Módulo de Informalidad, 4 Trimestre de 2005.

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8 Incidencia de la Informalidad Laboral en los Asalariados Según Rama de Actividad y Formalidad de la Unidad Productiva Fuente: MTEySS - Módulo de Informalidad EPH 2005 Construcción 70% Comercio 51% Transporte, Almacenamiento y Com. Hoteles y Restaurantes 44% 47% Industria Manufacturera Otros Serv. Comunitarios, Soc. y Pers. 38% 38% Serv. Finan., de Alq. y Empr. 28% Servicios Sociales y de Salud 26% Ad. Pública, Defensa y Seg. Soc. Enseñanza 7% 12% Informales en Unidades Productivas Formales Informales en Unidades Productivas Informales Informales en Unidades Productivas sin Especificar Formalidad 0% 10% 20% 30% 40% 50% 60% 70% 80%

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10 Underlying causes of changes in informality INCREASE ( ) succession of crises -> low growth and a bias against the demand for unskilled labor sustained rise in poverty and inequality temporary employment contracts + weak enforcement of labor legislation DECREASE (2003 -) Strong economic growth, particularly in low skilled sectors Stronger law enforcement and regularization incentives

11 Current policies Objective Regularization of informal workers Salaried informal workers in formal enterprises Informal domestic workers Simplification of rules and procedures, reduction of entry costs: - Tax simplification programs - Easy access to registration through specialized offices New scheme for formalizing unregistered employment (Law 26,476) - Discounts for employer contributions in SMEs for two years for new contracts - Extinction of debt contributions for regularized workers Regularization of domestic workers - tax deductibility, simplified registration procedure

12 Objective Extension of social protection to informal workers in informal enterprises Pension coverage, health care and transfers: - Moratorium / flexibility for pensions - Monotributo - Family allowances -Training and Employment Insurance - Youth Program for More and Better Jobs Impact and what are remaining gaps? - Although informality has decreased (e.g. domestic workers): still at 45 % - Social protection policies for the informal sector: -fragmented, - lack of coverage of entire sector, - absence of a basic package - no efficient targeting - poor administration and bureaucracy

13 Why social protection for informal workers? 45 % of the economy and are socially excluded Basic human right Absence is a social cost on society In the long run: contribution to poverty reduction

14 Voluntary Social Protection Saving Scheme for Informal Workers Solidarity General State Revenues Self employed (26%) Paid Employees in formal units (30%) Professionals, low skilled, subsistence Professionals, semi skilled Voluntary Savings in local $$ Mostly low income Mid income Pension (25 % of total savings). Long Term CDs. Higher interest Health (30% of total savings) Mid term: flex CDs. Higher interest no penalty for earlier withdrawals $$$$ Solidarity Solidarity Solidarity Paid employees in informal units (17%) Low skilled, subsistence Informal Workers (45%) Low income Unemployment (45% of total savings). Short to mid term. Lower interest Incentive Matching Subsidies Individual Saving Account Banking System Manage Accounts Banking System Training & Employment Insurance Youth & Better Work Program Monotributo

15 Operation Principles Objective Target Groups To expand social protection coverage to informal workers Workers in highly concentrated informal economic activities Characteristics of the System Match up to 10% of the minimum wage (gradual distribution according to income level. Low income gets the most) Triggers Pensions: Health: Conditions for access to savings Age according to law Medical Certificate Voluntary open to informal and formal workers Unemployment: Enrolment in VET or other skill development programme

16 Conditions Challenges Guarantees within the legal framework Institutional architecture for determining and monitoring Enough fiscal space Institutional setting for coherence (e.g. VET, regularization, bank) Ownership by informal sector Social marketing Lack of trust Transparency and certainty Incentives to move to informal sector Extension from urban to rural Adequate targeting