6th International Policy and Research Conference on Social Security

Emerging trends in times of instability: New challenges and opportunities for social security
Luxembourg, 29.91.10.2010

Policy interventions for bridging the social security coverage gap in the unorganized sector in the BRIC countries

Mridula Ghai Employees Provident Fund Organisation India

www.issa.int

4 route des Morillons Case Postale 1 CH-1211 Geneva 22

The International Social Security Association (ISSA) is the world's leading international organization bringing together national social security administrations and agencies. The ISSA provides information, research, expert advice and platforms for members to build and promote dynamic social security systems and policy worldwide. The view and opinions expressed here do not necessarily reflect those of the ISSA. International Social Security Association, 2010.

Policy Interventions For Bridging Social Security Coverage Gap In The Unorganised Sector In BRIC Countries

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Summary
The paper explores the possibility of drawing from the existing models of social security to design an effective policy intervention for bridging the coverage gap in the unorganised sector. The paper looks at the data from the BRIC countries along with the main features of the Anglo-Saxon and European models .It uses comparative method to identify the relative strengths of these models and to draw up the main principles of a framework for bridging the coverage gap in the unorganised sector. It uses the analytical method to place these principles in complimentary and supplementary relationships to draw up a framework of a policy intervention for bridging the social security coverage gap in the unorganised sector in BRIC and other countries.

1. Perspective
The global economic downswing has brought the focus on social protection as an economic shock absorber, poverty alleviator and social cohesion catalyst. Extension of social security policies that reduce long-term dependence through transfers promoting employment, productivity and individuals capacity to generate income, boost aggregate demand and help economic recovery. During the current crisis, progressive long-term social protection has shown to increase productivity, build human capital and sustain economic growth. This has been evidenced in Brazil, Russia, India & China, BRIC, as coined by Jim ONeill of Goldman Sachs (www.risklatte.com, 2010). The current economic crisis saw them resorting to structural changes in order to enhance social security coverage and effectiveness. Though, a vast section of their informal workforce still remains to be extended an adequate level of social security, they have made remarkable progress in this area.

In spite of fast economic recovery with high GDP growth rates, explosion of financial markets and high foreign direct investment, they have not been able to
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provide universal access to social security. They are not short of resources and their economies are growing at a fast pace. Goldman Sachs has predicted that by 2050, the economies of these countries would collectively outperform todays richest countries of the world, taken together (Dhar Sushovan, 2009). Further, Brazil and Russia would become dominant suppliers of raw material while China and India would be the dominant global suppliers of manufactured goods and services. The BRIC countries account for 40% of the global population and constitute one fourth of the Worlds land coverage. They are the biggest and fastest growing emergent markets and account for 22.4% of the global GDP (Dhar Sushovan, 2009). Due to the peculiar characteristics of the informal sector, these high levels of economic achievements have not helped in the herculean task of covering all in this sector.

The achievements of each of the BRIC country in the area of extending social security to some portion of the informal sector need to be looked into and lessons drawn, there from, can be intertwined with the strengths of the Anglo Saxon and European models to propound a broad framework of social security cover which could be adapted by the BRIC and other countries to bridge the social security coverage gap in the informal sector. To begin with, the social security initiatives in all the four BRIC countries may be studied. This would enable the drawing up of such a framework.

2. Brazil
Brazil is the 5th largest country in the World in terms of geographical area and population. It has a population of more than 190 million (economywatch.com, reference no. 49). It is the largest economy in South America with well-developed agriculture, mining, manufacturing and service sectors. It has a huge informal sector and its informal economy accounts for about 40% of its gross national income (Capp Joe, 2005). It has improved its economic stability, built foreign reserves, reduced debts, kept inflation rates under control and has been committed
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to fiscal responsibilities. It has been one of the first emerging markets to stage a recovery with GDP growth returning to positive levels.

In the wake of the economic crisis, leading to increase in the difficulties faced by the poor, working mostly in the informal sector (Capp Joe, 2005), Brazil decided to increase and expand access to social protection. A number of anti cyclical measures designed to safeguard employment, assist the unemployed and protect internal consumption (ILO, 2009, reference no. 18 ) were taken. Brazil used a mix of contributory, non-contributory and targeted policies to achieve a high degree of coverage. Through this, it was able to stabilise income, alleviate poverty and achieve income redistribution. This enabled Brazil to strengthen its domestic market and attain rapid economic recovery.

Through its Bolsa familia programme, Brazil lifted 4.3 million families, from a total of 12.5 million (ILO and WHO, 2010, reference 24), out of extreme poverty. There was 21% deduction in inequality, with income concentration reducing. This was a targeted social assistance programme that targeted lowincome families with children and adolescents. It incurred an expenditure of 0.4% of GDP in 2009 (ILO, 2009, reference no. 24).

It was aimed to supplement the family income with benefits linked to the socio-economic situation of a family, with a special tilt towards women. It was conditional on high school attendance of school aged children and adolescents under 17 years of age. It was also extended to pregnant women and small children who complied with health care standards requiring health examinations and vaccinations. Another condition was absence of child labour in the family. Targeting precision was to be achieved through development and maintenance of a unique social register. This programme was implemented in partnership with States

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and municipalities. It was interlinked with public social assistance, health, education, employment and housing services.

Universal Health Care System is public, free and provides universal access. It does not require out of pocket payments and is funded through taxes. The States and municipalities are partners in coordination, financing and production of services under the health care system. A family health programme is run with the help of community agents and inter-disciplinary teams to prevent sickness in the family and reduce the use of secondary health attention level. It has 28865 teams assisting 93.8% (ILO, 2009, reference no. 24) of the municipalities. The child mortality rate has fallen and life expectancy at birth has risen, over time.

The rural social security programme has helped re-distribute income regionally and strengthened food security by stimulating the production of food. This programme focuses on small farm farmers who utilise their own and their familys work. Based on production that is commercialised, a contribution is collected from the farmers by the buyer. This enables the state to reduce the collection transaction costs by having to interact only with 2000 commercial establishments instead of millions of small rural farmers (ILO, 2009, reference no. 24). The benefit is paid at a flat rate equal to the minimum wage.

The social pension system is a socially sustained programme for people about 65 or older and those with disabilities. It is conditional to the candidates having an income of 25% of the minimum wages or less per family member. They should not be benefited from another income replacement programme. The socioeconomic evaluation of potential beneficiaries is carried out before giving the benefits. The contributory social insurance system covers 66% of the active population (ILO, 2009, reference no.24) and pays benefits like pension, family allowance, retirement, health and maternity. Unemployment insurance pays more
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than 0.6 million benefits monthly. Employment search services and professional qualification facilities are provided by the Ministry of Labour and Employment.

3. China
In spite of the economic downturn, China expanded its social security cover. Its social insurance programme reached a new high in terms of the number of people covered. Its urban pension insurance covered 235.5 million people by the end of 2009. Migrant workers coverage witnessed an increase of 2.31 million workers, raising it to a total of 26.47 million at the end of 2009. Pension fund revenues topped 1.15 trillion Yuan by the end of 2009, up 18 per cent year on year. The countrys basic urban medical insurance covered 401 million people in 2009. Unemployment insurance covered 127 million while those carrying work injury insurance reached 149 million (www.china.org.cn, 2010, data source for this paragraph).

China strongly moved ahead with the implementation of the first stage of the process of achieving the conversion to a welfare state by 2050

(www.thaindian.com, 2008). The first stage (2008-2012) is to see the creation of a social safety net. It is to provide a minimum living allowance, medical insurance and pension for all urban and rural residents. The second stage (2013 to 2020) would make the social security network stable and sustainable. The third stage (2021 to 2049) would further improve provisions to eventually build a socialistic welfare society with Chinese characteristics.

China has made remarkable progress in not only urban formal sector but also in respect of the vast informal sector in both urban and rural areas, a large proportion of which includes poor and low income families. Two minimum living standard guarantee schemes that provide income security, for those having income

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below the locally determined minimum levels, have made these benefits universally available to both rural and urban areas.

In addition to the health insurance scheme for the urban working population, China has introduced two new health insurance programmes for the rural and economically inactive populations. In order to encourage participation in these schemes, the government subsidizes at least half of their revenue. At the end of 2009, these schemes together covered a total of one billion people. The urban population health insurance scheme, along with these two schemes, covers a total of 1.2 billion people out of a total population of 1.3 billion (ILO & WHO, 2010, reference 25).

A rural pension system is to be established for the entire rural population by 2020 (ILO & WHO, 2010, reference 25). Pilot projects were started in many areas in 2009. This aims to provide a universal pension to all rural residents aged 60 and above, conditional to their families participating in the new rural pension system. An optional individual saving account-derived pension can also be maintained, additionally.

In the urban areas, China has a multi-pillar pension system. Pillar IA is designed as a payas-you-go system. Pillar IB is individual account-based with mandatory employee contribution (CFA Institute, 2009). Both pillars IA and IB are administered at the provincial level.

In addition, China introduced Pillar II and III in order to create private voluntary occupational pension schemes. Pillar II plans are known as Enterprise Annuities or voluntary occupational pensions. These plans are defined contribution plans established by eligible employers. By 2005, Enterprise Annuities Plans covered 9 million employees in 24000 companies (CFA Institute, 2009). Pillar III
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consists of other individual account-based voluntary private schemes that do not conform to Enterprise Annuities Plans.

China set up the National Council For Social Security Funds (NCSSF) to provide funding and stability to its pension reforms. It was to manage the National Social Security Fund (NSSF). The NSSF is funded by fiscal allocations from the Central Government and proceeds from public share sales (i.e. initial public offerings) of State Owned Enterprises and national lotteries

(www.actuaries.org). It is meant to be a fund of last resort that could support the funding needs of the various pension schemes across the nation. It also manages the monies of some of the provincial pension funds.

4. Russia
Russias social security system consists of both social assistance and social insurance. It covers all employed persons and their dependents. It is also extended to farmers, crafts persons and clergy. Special provisions are made for students, teachers, physicians, sportspersons and pilots (Rosgosstrakh, 2010). A social pension is provided to the disadvantaged-aged, the disabled and survivors not eligible for other social insurance protection. In addition, a voluntary supplemental system is available to all workers. Unemployment coverage is available to all employees in Russia. Unified Social Tax (UST) has been replaced by social contributions (paid by employees at 26% of the payroll) since 1st January 2010 into four off budget funds (Miura Yuji, 2009).

All residents of Russia are eligible for free of charge medical care. Along with medical services, cash benefits are also available to all employed people, students and members of cooperatives. Private health plans are also available, optionally.

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During the economic crisis, the Russian government focussed on preserving social security expenditure and providing social assistance to all, including those in the informal sector. It laid stress on employment generating mechanisms and social programmes. Highest priority was given to the unemployed and other vulnerable persons under the social protection programmes. Ceiling on unemployment benefit was raised by 50 per cent (Heavier MarionAdmin 2009). Social payments and allowances were raised by 10% to maintain purchasing capacity and to mitigate inflation effectively. For vulnerable groups like single parents, parents of small or disabled children, ex-prisoners and persons with disabilities, a special targeted employment programme was launched.

As a result of this, labour productivity increased by 50% and the number of people living below the poverty line almost halved. Though, there was a decline in salaries, the average income increased by 2.3% in 2009. From 7.1 million in February 2009 unemployment declined to 6.4 million in March 2010. Mortality rates declined 3%. The number of small and medium-sized companies grew by 2.8% in 2009. Agriculture production grew 1.2% and grain exports went up 60%. In 2010, GDP is expected to increase by 3.1%. In the first quarter of 2010, growth increase in industrial production was 5.8% and real income increased 7.4% (Putin Vladimir, 2010, data source for rest of this section).

The financial sector, industries and social services became far more effective and stable. 2.5 trillion roubles went towards payments of salaries, pensions, social benefits, education, healthcare and housing. Russia managed to preserve primary social programmes, to implement selective social support measures and to help those who had lost their jobs or whose incomes had plunged.

Major pension reform was carried out, raising pensions substantially. Retirement benefits were indexed four times in 2009 - in March, April, August and
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December. The average annual effective growth was 10.7%. Senior citizens' incomes were raised above the poverty line.

Maternity capital has been indexed and now totals 343,000 roubles. Under the Maternity Capital programme beneficiaries received cash for their current needs, 12,000 roubles each. Children's allowances were increased 13% on January 1, 2009 and by another 10% on January 1, 2010. Employment-facilitation programmes covered 2.8 million people in 2009. In 2010, employment programmes will receive 40.5 billion roubles.

In 2009, assistance to agriculture from the budgets of all levels amounted to approximately 300 billion roubles. Another 776 billion roubles were provided to farms in the forms of loans, including 453 billion roubles as easy term loans at interest rates subsidised by the government. 1 million 600 thousand women have taken advantage of the birth certificate programme. A special reserve fund has been created as a part of the Federal Mandatory Medical Insurance Fund. Its reserves would be disbursed through regional programmes for the modernisation of the healthcare system, with due account for the particular characteristics of various territories.

In 2008-2009, the Housing and Utilities Reform Fund invested 166 billion roubles in major renovations of high-rise buildings and efforts to relocate families out of hazardous buildings. Housing has been repaired for 11,300,000 people. All war veterans are to be provided with housing.

5. India
India has witnessed unprecedented levels of economic expansion. India saw a GDP growth rate of 9.40% in 2007, 7.30% in 2008, 5.40% in 2009 and in 2010, it

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is projected to be 7.20% (www.economywatch.com,2010, reference 50). 86% of Indias workforce works in the informal sector, of which 65% works in agriculture (Remesh Babu P.,2009). Informal employment both in the organized and unorganised sector is about 92% (Remesh Babu P., 2009).

In spite of the World economic crisis, India expanded its social security network and expenditure. Under the National Rural Employment Guarantee Act, National Rural Employment Guarantee Scheme (now known as Mahatama Gandhi National Rural Employment Guarantee Scheme) was launched in 2006. It aimed at improving the purchasing power of rural people, specially the landless labourers, marginal farmers and others living below the poverty line. It guaranteed 100 days of unskilled or semi-skilled work, in the context of public work, to one adult member of a rural household. Expenditure has increased on National Rural Employment Guarantee Scheme from $ 2 billion in 2006-07 to over $ 8 billion in 2009-10. The programme focuses on public works aimed at laying the basis for increased agricultural productivity in the future through watershed management, land development and drought proofing programmes.

From 200 poorest districts covered in 2006-07, the programme has been expanded to all the 619 districts in 2008-09. In 2009-10, 1765 million person days of employment have been benefiting 39 million households. In 2009, the programme provided 200 person days of work per year to every household in the 272 drought affected districts. It had also had an impact on gender equality by involving 49.5% of women of the total persons benefiting from the scheme in 2009-10 (ILO, 2010, reference 19).

Out of the poorest, elderly 30% have been extended benefits through the expanded Indira Gandhi National Old Age Pension Scheme. In 2009, 1.47 million people were covered (ILO, 2010, reference 19). In December 2008, a
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comprehensive Unorganised Workers Social Security Bill was adopted extending to the workers in the informal sector (including agricultural workers and migrant labourers) health benefits, life and disability insurance, old-age pension and a work injury scheme (ILO, 2010, reference 19).

In partnership with the State Governments, the Central Government coimplemented the Rashtriya Swasthya Bima Yojana in 21 states providing medical coverage to families below the poverty line (ILO, 2010, reference 19). The scheme gets 75% of the funding from the national government and covers 4.5 million workers. Medical treatment, including maternity benefit, is available to them through the use of a biometric smart card.

In addition, the Mid Day Meal Scheme (MDMS) covering 95.7 million people (Remesh Babu P., 2009) and Integrated Child Care Development Scheme (ICDS) provide targeted nutritional intervention involving provisioning of cooked food to the most vulnerable among the poor (especially children) through selftargeting. The Targeted Public Distribution System (covering 198 million households) provides cereals at highly subsidized prices to the identified poor (Remesh Babu P., 2009). A Community Grain Bank Scheme targets the scheduled Tribes living in remote and backward areas. It is a participatory model that provides food security to these vulnerable groups in the informal sector.

In addition, a number of occupation specific welfare funds (over 60) exist, which design and implement social safety nets through effective involvement of the stakeholders (www.concertation.org).

Janashree Bima Yojana targets 44 occupational groups (Palcios Robert and Philip OKeefe, 2006) providing to the urban and rural people, living below the poverty line, insurance cover in the event of natural or accidental death and partial
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or permanent disability. Central Government and the beneficiary or some local nodal agency or State Government fund it. Varishta Pension Yojana, launched in 2003, provides pension to the unorganised sector workers aged 55 and above. The beneficiaries finance it. Aam Admi Bima Yojana, started in 2007, provides death and disability benefits to the rural landless poor. The Central and State governments fund it.

In 2004, the National Pension Scheme was launched. It is low cost and aims at encouraging voluntary participation by all those who have no pension cover. It is also open to the unorganised sector workers on a voluntary basis. It is fully funded and has two accounts Tier I and Tier II. Tier I does not allow premature withdrawals before the retirement age. Tier II is withdrawable and has no tax incentives. Pension benefits are available at age 60. At retirement, 40% of the assets accumulated have to be used to buy annuities (Sinha, U.K., 2004). The remaining amount can be withdrawn as lump sum. The amount and periodicity of contributions is left to employee and employer discretion.

6. BRIC:Mutual Lessons
There are innumerable similarities among the social security systems of the BRIC countries and yet, there is much they can learn and adapt from each other. All of them have multi-pillar pension systems; a mix of social insurance and social assistance; their social security systems have expanded inspite of the economic crisis; their social transfers have been targeted and promote employment as well as productivity; they stress on local bodies and communities; focus on children and pregnant women and in some ways they all lay emphasis on occupation-based systems: Brazils closed and open occupation-based pension funds (Social Security Administration,2010); Indias welfare funds; Chinas enterprise Annuities and Russias special provisions for teachers, physicians, sportspersons and pilots.

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However, there is much they can learn from each other. India needs to provide universal health coverage (universal for Brazil and Russia; 92% for China). BRICs could pick lessons from Brazil where Bolsa Familia supplements family income conditional to school attendence, eradication of child labour, health check ups and vaccinations (for both children and pregnant women). The Mid Day Meal and Grain Bank programmes, in India, could help others focus on nutrition and food security. Brazils trageting through social register and Indias self-targeting in Mahatama Gandhi National Rural Employment Gurantee Scheme can also be used as inputs for developing targeting strategies. Maternity benefits of Russia with full or part time leave to either parent have unique child care focus. This and Russias stress on housing could be taken up by other countries. Brazils social security administrations increased efficiency through scheduling, selectivity and resolvability is also worth special attention (Baroni Margaret, 2009).

7. Anglo-saxon model
The Anglo-Saxon system (en.wikipedia.org , 2010) focuses on a limited collective provision of social protection merely to cushion the impact of events that would lead to poverty. The main feature is its social assistance of last resort. Subsidies are directed to a higher extent to the working-age population and to a lower extent to pensions. Active labour market policies are stressed upon. The Anglo-Saxon countries base their social protection on unemployment benefits and a low level of employment protection.

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8. European Model
European social model is a set of principles and values, common to all European regions. It stands for principles such as solidarity; social justice; social cohesion; equal access to employment, in particular for the young and the disabled; gender equality; equal access to health and social protection; universal access to education; and equal opportunities for everybody in society (en.wikipedia.org, 2010).

9. Towards drawing a framework

After having seen the details of the path taken by the BRIC countries in the area of extension of social security, especially in the informal sector, it is clear that though they have taken strong strides in extending coverage to those with no or inadequate social security cover, a lot needs to be done in order to provide minimum protection to all. The evident effective principles adopted by them need to be intertwined in complementary and supplementary relationships with the strengths of the existing systems of social security, in order to draw up a framework for the extension of social security to all in the informal sector. Those characteristics of the existing Anglo Saxon, European and other models that are relevant in the context of the informal sector social security, are identified for incorporation in the framework being attempted.

Private household based systems (Jutting Johanner, 2000) provide informal insurance mechanism based on network of friends and relatives. They effectively check moral hazard but are ineffective in dealing with covariate risks like natural disaster and crop failure. Member-based organization systems (Jutting Johanner, 2000) are often formed on religious or ethnic lines. They do not support equity of access, have low operational efficiency and low quality of service due to

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inadequate training and technical knowledge. They serve the interest of their members with a missionary zeal and can also check moral hazard.

In case of market based systems (Jutting Johanner, 2000), the risky environment, lack of infrastructure and information asymmetries lead to high unit transaction costs per insurance contract. This raises the premium levels, making the social insurance products inaccessible to the vast majority of people with seasonal, fluctuating and low incomes in the informal sector. State based systems have failed to cover adequately 80 per cent (ILO, 2009, reference 17) of the global worker population, especially those in the informal sector. The state systems suffer from information asymmetries and institutional weaknesses. Statutory power behind such systems makes their extension to unwilling individuals and groups easy.

Any effective framework for extending social security to the unorganised sector must, therefore, be based on a public-private partnership that provides welldefined complementary division of labour between the state, citizens and other social partners.

Further, such a framework must have flexible terms (Hu Yu-Wei, 2009), allowing irregular contributions that correspond to the income patterns of seasonal industries and unemployment spells of the workers. If possible, it must provide monetary incentives in the form of tax credits or tax rebates. Even where people are able to pay for insurance or are eligible for various schemes, they do not become members due to lack of awareness. The framework must create high level of public awareness through participation and information flow on benefits available under social security schemes. Membership must be mandatory. The model must utilize existing infrastructure.

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The model must provide for a single national clearinghouse (Hu Yu-Wei) helping convenience of participation and ensuring cost-effectiveness. All social transfers to the poor and unemployed must promote income expansion with welfare interventions having in-built productive initiatives. Access to markets and productive resources must be facilitated through credit programmes and training. Social security benefits and poverty protection must be extended as predictable and specified rights.

The framework must provide for state guaranteed universal access to a formal system of social security with special stress on children, poor, old, disabled and the unemployed in the active age group. Its design must support higher levels of security to more and more people in synch with the level of economic development.

Based on their socio-economic-cultural context, demographic factors and traditional preferences, various countries should be able to adapt the framework to their chosen path for providing universal basic guarantees. It must support participatory governance by all stakeholders. Transparency of finances must be maintained and long-term sustainability ensured. It must be in line with World Banks system design parameters of adequacy, affordability, sustainability, equitability, predictability and robustness (www.worldbank.org)

10. The Proposed Framework

The proposed framework is based on the definition of the informal sector workers adopted by ILO. At the outset, based on this definition the framework takes into account the characteristics of the informal sector workers as well as the various risks faced by them. Further, based on a clear understanding of these, the framework discusses the various components of the proposed social security set-up

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for the extension of an adequate level of social security cover to all informal workers.

10.1 Definition
Informal sector workers are defined as those workers whose employment relationship is not subject to labour legislation standards, taxes, social protection and other labour benefits like vacations, sick leave, firing indemnity, etc (Tokman Victor E, 2007).

10.2 Characteristics
The informal sector is characterised by absence of Official Protection Act and recognition; non-coverage by minimum wage legislation and social security system; predominance of own account and self-employed workers; absence of trade union organisations; low income and wages; little job security and fringe benefits from institutional sources; small scale operations with individual or family ownership; reliance on locally available resources; family ownership of enterprises; labour intensive; low technology based and absence of access to institutional credit or other supports and protections (www.gdic.org).

10.3 Risks
Most of the informal sector workers lack any form of social protection against risks and vulnerabilities (Ghai Mridula, 2007). Most of them live below or at the margin of the poverty line. Any calamities, whether natural or man-made, may push them into abject poverty. Man made calamities like war, riots or any other form of civil unrest leaves them highly vulnerable to further impoverishment. Natural calamities such as flood, drought, heavy rainfall or any other extreme weather conditions may adversely affect their income levels. Further, life cycle

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risks like old age, death of the bread earner, pregnancy or marital breakdown can subject them to no or low household income. This may push them into vicious cycle of poverty. The informal sector workers have very low-income levels and any loss of earning capacity can make them further vulnerable and insecure. Loss of job, ill health, accidents, disability and damage to their productive assets can push them into a lifetime of poverty.

The low income of the informal workers due to under-employment and low wages, unprotected by labour legislation, lead to low or no savings. They are usually struggling to meet the basic needs for survival and are left with virtually no surplus to save. Any sudden large expenditure due to social customs or other requirements may lead to indebtedness and exploitation at the hands of moneylenders. Expenditure on marriage, birth ceremony, death ceremony, education and sickness may lead them to fall prey to lifetime of debt.

10.4 Affordability
This framework also presumes that countries can afford to build a basic level comprehensive social security package. A universal pension or social assistance scheme can be started with one to two percent of annual GDP as per ILO. ( ILO, 2009, reference 17 )

10.5 Overview
The aim of the proposed framework is to provide the individuals, occupation-based groups, municipalities and villages targeted social assistance to enable them to have adequate levels of assets and entitlements. The individuals

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Proposed Social Security Framework

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should have appropriate levels of assets (financial, human, physical and social) to enable them to face various risks, have access to adequate minimum facilities and to afford social insurance. The individuals would be organized into occupationbased groups that would be able to provide occupation-based specific facilities to their members. They would be able to help their members achieve highest level of skill up-gradation along with the ability to produce goods and services that would be marketable and would be able to fetch them adequate income. The municipalities or villages would be able to generate enough resources to provide basic amenities to all their residents including the vulnerable occupation-based groups and individuals.

As per the mandate of the social protection floor propounded by the ILO (ILO & WHO, reference 23) all individuals must be provided with physical and geographical access to basic amenities like water, sanitation, education, health, nutritious food, life and asset saving information along with social transfers to vulnerable groups like active age people with insufficient income , the old and children. In order to be able to implement this minimum social protection floor, a geographical entity needs to be identified, which would make provision for the basic amenities, help identify vulnerable individuals, have effective information flows to prevent moral hazard and free loading. In the proposed framework, this entity has been identified as the municipality or the village.

Further, various country experiences have shown that in the informal economy various social assistance and social insurance schemes need to be tailored to meet specific needs of various occupations. It has been recognised that each occupation, in the informal economy, has a specific set of needs and requirements which when left unattended can make them vulnerable, push them below poverty line and sometimes into abject poverty.

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In some of the BRIC countries, special schemes have been formulated for various occupations, for example, the occupation-based welfare funds in India, scheme for fishermen in Brazil (ILO, 2010, reference 19) and enterprise annuities in China (www.actuaries.org). This framework has tried to in-build these occupation-based requirements by suggesting organization of active age individuals into occupation-based groups federating at the municipality or village level.

10.6 Social Assistance

The proposed framework would aim at identifying the risks faced by the individuals and evaluate their capacity to effectively handle these risks. This analysis would be based on social indicators, with emphasis on the individuals assets and entitlements, to identify vulnerable groups and individuals. These vulnerable groups and individuals would be provided social assistance.

The active age vulnerable individuals, drawing social assistance, would be endowed with assets and entitlements to free them of the vulnerability and to enable to pay for social insurance. The vulnerable old, children and the disabled would be targeted for social assistance to save them from being pushed into abject poverty and to provide them with facilities to maintain a minimum standard of living. This social assistance would provide for special health care, nutritious food, clothing and other basic facilities like water, sanitation and housing.

10.6.1 Individuals
The framework would make special provisions for the vulnerable individuals depending upon the kind of vulnerabilities faced by them.

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Active Age Vulnerable Individuals The vulnerable active age individuals would be identified for targeted social assistance programmes. The social assistance programmes would be combined with positive labour market policies for the active age population. Training, market information, assistance to find work and access to credit shall also be provided. For the totally unskilled, employment in public works would be provided. Further identification of the individuals who could be trained to be semi-skilled would be done. On the job skill up-gradation and placement in permanent productive work with adequate income would be aimed at.

Disabled Depending on the degree of disability, the possibility of rehabilitation with provision of appropriate kind of work would be explored. Among the vulnerable disabled, a distinction would be made by the municipal and village authorities among those who have high degree of disability, making them incapable of any productive work and those who can be appropriately trained and rehabilitated into productive work allowed by their low level of disability.

Such disabled would be provided with social transfers along with adequate support from occupation-based groups in terms of training, technology, access to credit, market linkages, production tools and market information. This social assistance would be conditional to the disabled being willing to take up possible productive work. The municipal and village authorities would support this effort by providing them with adequate health facilities and other basic amenities. The social assistance would be provided till such disabled individuals are able to have adequate level of income to protect them from poverty. Subsequently, on being engaged into productive work, with appropriate level of income, they would subscribe to a social insurance scheme and pay the contributions.

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Risks & Social Security

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Children The vulnerable children would also be identified and social assistance would be provided to them to enable them to grow up and enter the market as active age individuals with adequate levels of assets and entitlements. This social assistance would be conditional on school attendance, vaccinations, absence of child labour and regular health check ups. In-kind transfers would be made to ensure availability of nutritious food and medicines. Free health services would be

provided for children focussing on regular health checkups, vaccination and preventive health care.

The objective would be to build future work force with good health, education and market-oriented skills. Healthy children with adequate skill and knowledge set would be able to be gainfully employed with high productivity and at least an appropriate level of income. High or adequate income would help pay for social insurance, thereby, reducing the burden on social assistance programmes.

10.6.2 Occupation-Based Groups

This framework envisages organization of individuals into occupation-based groups federating at municipality or village level. These groups would have active individuals without adequate assets and entitlements along with those who would have an adequate set of assets and entitlements, with the capacity to pay for social insurance. The occupation-based groups would identify the vulnerable individuals and would try to use their surplus resources to strengthen their assets and entitlements, thereby, making them self-reliant and enabling them to pay social insurance contributions.

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The occupation-based groups would provide the vulnerable active age individuals, the self-reliant individuals and other members of the group with training; latest technologies; access to credit, market linkages, expensive production tools and updated market information. The occupation-based groups that do not have access to resources to provide basic occupation-based facilities to their members would also be entitled to targeted social transfers to enable them to provide these basic facilities. This social assistance would be used in such a way so as to make the occupation-based groups self-reliant in the long run.

10.6.3 Municipality Or Village

The members of these groups would be residents of a particular municipality or village. The Municipality or village would provide health facilities, water, sanitation, roads, educational facilities, asset and life saving information etc. The municipalities or villages that would not have adequate resources to provide for these basic facilities to their residents would also be entitled to targeted social transfers. Such municipalities and villages being identified by district level authorities would ensure precise targeting of social transfers. The district authorities would be helped by municipalities and village authorities to identify vulnerable individuals and occupation-based groups with insufficient assets and entitlements.

10.6.4 Targeting: Social Register

For the purposes of targeting, a social register would be maintained and regularly updated at the district level. The municipalities or villages would provide information on occupation-based groups and individuals based on social indicators, asset and entitlement levels. At the district level, based on the same criteria, various municipalities and villages would be evaluated. Those with inadequate level of assets and entitlements for providing their residents with basic amenities
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like health, education, water, sanitation, roads, housing, assets and life saving information would also be entered in the social register for grant of targeted social transfers. Social transfers would also be made to occupation-based groups who have inadequate resources to provide training, technology, access to credit, market linkages, production tools, market information and other occupation-based facilities to their members. The stress would be on strengthening their assets and entitlements so as to make them self-reliant in providing these facilities to their members.

10.6.5 Taxes: Collective Self-Reliance

The focus on the municipality, village and occupation-based groups in the framework also aims to promote the strengthening of social assets by creating reciprocal social networks. The high transaction cost of collecting taxes and redirecting, a part of them as social assistance targeted at vulnerable individuals or groups has also been addressed in the framework. This framework emphasises on self-reliance of occupation-based groups who would use their surplus to help vulnerable active age members to strengthen their assets and entitlements so as to achieve an adequate level of income, ensure a minimum living standard and afford social insurance. Wherever such occupation-based groups would still have a surplus they would pay for the social insurance contributions for their vulnerable members who are unable to pay these contributions.

Each municipality and village would use its surplus, after provisioning for basic amenities, to strengthen the assets and entitlements of all its residents and if possible pay for social insurance contributions for those unable to pay due to their poor income levels. Thereafter, a portion of any further surplus left would be taxed to fund social assistance for those who are vulnerable and residing in other

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municipalities and villages. Municipalities and villages would be given social assistance till they achieve a minimum social protection floor level.

These municipalities and villages would be identified at the district level and a progressive tax policy would be followed to redistribute income so as to achieve a minimum standard for all municipalities in the district. The provincial authorities would levy tax on further surpluses at the district levels. The provincial authorities would achieve for all its districts, a certain minimum level by focussing on the vulnerable districts. Once such minimum social protection floor would be provided to all residents of a province, the surpluses would be taxed by the national government and the revenue redistributed as social assistance to other vulnerable provinces. Any shortfall at the national level would be met by international aid.

11. Policymaking
The municipal level federations would federate at the block level. Block level federations would be grouped into district level federations, which in-turn, would federate at the provincial level. The occupation-based provincial level federations would be further grouped into national level federations. The national level federation of each occupation would influence the policy decisions of the national social security policy division. The needs and demands of various occupations would move upwards, through a hierarchical set up, to act as a pressure group that would help get responsive policy decisions from the national level with social security, social assistance, labour laws and tax structures being tailored to address the special needs of each occupation.

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12. Social insurance

The framework proposes to strengthen assets and entitlements of individuals so as to reduce reliance on social assistance and increase the numbers who could afford to pay for social insurance. For the individuals with the capacity to pay for social insurance, membership of a social insurance scheme would be mandatory. Wherever individuals in occupation-based groups would be unable to pay social insurance contributions, the occupation-based groups would be required to pay them, if they have sufficient surplus resources. In case of occupation-based groups, not having any surplus resources to pay for the vulnerable active age individuals, the municipality or village would necessarily pay for them, if there is surplus available.

The insurance contributions would be collected by village, municipality or district level social security bureaus in coordination with the municipalities or village authorities to help check evasion. The contributions would be moved from the district level to provincial level and in-turn to the national social security fund maintained by the national social security bureau.

Various countries have experienced that having a common fund and a central clearing agency helps to increase the viability and sustainability of the social insurance schemes. This framework also espouses the establishment of a single national social security fund that is managed by a group of investment experts. These experts would ensure that investments are made in a manner that ensures highest possible return. If required, help of external asset managers or portfolio managers would also be taken. The benefits of the social insurance scheme would flow through the provincial and the district levels to the municipality or village level, where it would be ensured that timely and accurate benefits are delivered to the right beneficiaries.

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Identification of the right beneficiary would be much easier at this level due to absence of information asymmetry and strong social networks, specially, the occupation-based groups. The coordination of social security local bureaus with the municipal and village authorities would be able to check the leakage of the social insurance fund, through withdrawals for various exigencies. They would be able to do so effectively by being able to check the actual occurrence of the exigency through the social network.

These national social insurance security schemes for various occupations would also be able to address the problem of covariate risks faced by various occupational groups in a municipality or village. With the extension of the geographical area covered by the social insurance scheme, the risk pooling would be effective in the face of geographically localised covariate risks like natural calamities (drought, flood, famine) and also man made risks like riots and war. The extensive expanse of the risk pool would be able to effectively face these shocks and retain financial viability in spite of having to a pay a large number of beneficiaries at a given point in time.

The presence of a social security bureau at the local level, where possible, with close interaction with municipal and village authorities would be able to handle transactions effectively .It would also ensure that the interface between the social insurance provider and the beneficiaries is people-friendly. Accurate beneficiary identification would prevent frauds. Quick delivery of benefits at the door of the beneficiary would also be ensured.

13. Monitoring
National Social Security Bureau collects the performance data for both social

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insurance and social assistance schemes. It carries out performance reviews and gives feedback to lower formations. Based on this data analysis, it also gives inputs to the National Social Security Policy Division for policy refinement and new initiatives .It also provides social assistance scheme formats, enabling effective implementation.

14. Conclusion
The proposed framework is not meant to be a blueprint for all countries striving to extend universal social security cover to their informal sector. It only provides the basic principles that must be intertwined in the very fabric of the path chosen by each country to achieve the goal of providing basic guarantees to all. A countrys journey towards providing a minimum level of social protection to each person in the informal sector would depend on its socio-economic-cultural situation, demographic factors and traditional preferences.

14.1 Policy Outcomes And Lessons Learned

Any policy attempting to provide a comprehensive social security cover to the unorganised sector must distinguish between those who can pay for social insurance and those who need social assistance; it must stress upon mandatory participation in individual account-based social insurance scheme for those who can afford to pay; for those unable to pay for social insurance, social assistance must be intertwined with positive labour market policies to empower them to engage in productive employment enabling them to shift to the category of those capable of paying for social insurance; it must aim to progressively increase the numbers capable of paying for social insurance; it must provide for in-built reciprocity with a part of the surpluses being redistributed through taxation to achieve an adequate minimum standard of living and access to basic facilities for
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all; social security needs can be best addressed when organized on the basis of occupation, locality and community ; special provisioning must be made for those in the inactive age group, with specially focus on children so as to create a healthy ,educated and skilled future workforce capable of paying for social insurance; emphasis must be placed on provisioning for the disabled ; where possible social assistance may incorporate social insurance contributions for the time period which is taken by a person to use social assistance to become gainfully employed and becoming capable of paying for himself.

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