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Protecting All: Risk-Sharing for a Diverse and Diversifying World of Work

The rapidly changing nature of work across countries at all income levels requires a dramatically new approach to social protection and labor policy. This paper analyzes how drivers of disruption in labor markets are challenging the foundations and viability of the social contract in low-, middle- and high-income countries. The paper proposes a new approach to worker protection and social security that is more relevant and effective for a diverse and fluid world of work.

Forces disrupting markets and changing the nature of work present a fundamental challenge to prevailing employment-based risk-sharing policies in countries at all levels of development. These forces are diversifying the ways people earn their livelihoods. Work in low- and middle-income countries has always been diverse, fluid, and overwhelmingly informal: unobservable and beyond the reach of the state’s ability to enforce the obligations and benefits of a country’s social contract.

In contrast to this diversity and fluidity, prevailing employment-based risk-sharing policies assume a level of homogeneity and stability in the ways people work that reflects the reality of only a minority of workers in these countries. More recently, the assumed homogeneity and stability of work has changed even in the high-income countries where these policies were conceived of and developed. Both these situations raise concerns that current risk-sharing policies are losing relevance for working people.

The changing nature of work challenges the assumptions underpinning the policy tools for managing risk and uncertainty, which have for the most part remained built around the assumption that most people are in a stable, “standard” employment relationship.

This paper proposes a package of protections, labor benefits, and services that are more relevant to the diverse and diversifying world of work. Here are five key messages for policy makers.

The foundation of risk-sharing policy is poverty prevention and subsidized protection from catastrophic losses, financed from broad-based taxes. With robust protections in place, available to all people wherever and however they work, governments’ mandates can be less distortive. Rather than protect workers from change, governments can shift their efforts to protecting them for change by supporting transitions and reemployment. Given daunting resource and capacity limitations in most countries, a progressive universalization of risk-sharing coverage will be more fiscally viable and sustainable. Digital technology can be harnessed to mobilize tax resources for this extended coverage and to deliver protection more effectively, efficiently, and equitably.