Changing nature of work requires new approach to social protection policy: World Bank

In developing countries, up to 80 percent of workers earn their living in the informal economy. Hence traditional, employment-based social protection policies fail to provide effective protection from risk and uncertainty.

The rapidly changing nature of work in countries at all income levels requires a dramatically new approach to social protection and labor policy, according to a new white paper launched today by the World Bank. Titled “Protecting All: Risk-Sharing for a Diverse and Diversifying World of Work”, it analyzes how drivers of disruption are challenging the viability of the social contract in low, middle and high-income countries.  It proposes an approach to worker protection and social security that is better adapted to an increasingly diverse and fluid world of work.  

In developing countries, up to 80 percent of workers earn their living in the informal economy.  Hence traditional, employment-based social protection policies fail to provide effective protection from risk and uncertainty. Meanwhile, in richer countries, technological change is changing the nature of work, making long-term employment less common.  Work is also growing more diverse with the rise in the gig economy and the trend toward workers having a “portfolio” of jobs.

“Globally, the nature of work is being upended.  This means that social protection – an essential component of any social contract – must be reorganized to become less dependent on where or how a person works,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice. “The objectives of risk-sharing policy remain crucial: alleviating and preventing poverty, protecting against risk and uncertainty, and helping families smooth their consumption over the course of their lives. But how countries achieve these objectives needs to fit a changing world of work.”

The paper examines the employment-based model of social insurance and worker protection, documenting how policy interventions fall short when they assume most people have stable employment relationships informal factories and firms. For example, in Bangladesh, India, Indonesia, Nigeria, and Pakistan – which together have about one-third of the global population – coverage of social insurance for workers remains in the single digits and has changed little in recent years.

“Effective risk-sharing policies are fundamental to building and safeguarding a country’s human capital.  But they must reflect the diverse and fluid ways that people work today and are likely to in the future,” said Truman Packard, World Bank lead economist and lead author of the paper. “Problems arise when the changing nature of work collides with rigid policies.  Rather than protecting workers from change, governments must now help them adapt to change and support job transitions.”

As governments face resource and capacity limitations worldwide, the paper proposes a “progressive universalism” approach, covering the needs of the poorest and most vulnerable people first, then expanding to other households based on the level of need, toward the aim of universal coverage. The paper finds that the advance of digital technologies drives disruption but can also be a key tool to mobilize tax resources and deliver social protection more effectively, efficiently, and equitably.