February 12, 2024 | Working Paper
  • Headline: Shifting the Debate About Social Protection and Informality
  • Intro Text:

    The introduction of social protections for individuals engaged in paid employment frequently comes up against arguments that such measures would have adverse impacts on employment, reduce access to formal jobs, and result in greater informality. PERI researchers James Heintz and Jayati Ghosh critically evaluate such arguments and provide responses to the claim that social protections lead to higher informality. They also consider the challenges involved in providing social protection to different types of workers, including not only those employed by others but specifically the self-employed and unpaid workers.

  • Type of publication: Working Paper
  • Research or In The Media: Research
  • Research Area: Economics for The Developing World, Economic & Human Rights
  • Publication Date: 2024-02-12
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  • Authors:
    • Add Authors: James Heintz
    • Add Authors: Jayati Ghosh
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Abstract

The introduction of social protections for individuals engaged in paid employment frequently comes up against arguments that such measures would have an adverse impact on employment, reduce access to formal jobs, and result in greater informality. The argument is that, while well intentioned, such policies distort labor markets and generate significant economic costs that either leave some workers worse off than they would have been in the absence of such protection, or the interventions become a drag on overall economic performance, encumbering the process of development. In what follows we critically evaluate such arguments and provide responses to the claim that social protections lead to higher informality. We also consider the challenges involved in providing social protection to different types of workers, including not only those employed by others but specifically the self-employed and unpaid workers.

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