2.3 Type of retirees authorized to register

Innovations in extending social insurance coverage to independent workers 79

12. Conclusions

The advances made by the social security systems of the countries considered in this study demonstrate the importance of establishing a differentiation policy framework specifically targeting independent workers. This study provides information which aims to help, from a practical rather than a theoretical perspective, the decision makers and the social security administrations which must cope with practical design issues daily. One of the study‘s main conclusions is that, in practice, countries choose different paths leading to specific and varied national practices, which we have called ―innovations‖, even within the same country or social security system. The search for such innovations is relevant, given the many facets or dimensions that are involved in defining the complex characteristics and necessities of a highly heterogeneous group which is hard to provide coverage for, as is the case for independent workers. A common element of the experiences considered in this study has to do with the practical difficulties of attaining coverage for a significant proportion of independent workers. Despite the interesting innovations introduced by countries, it remains clear that developing countries still have a long way to go before achieving universal coverage. The challenges are particularly huge for countries with a large share of independent workers in the informal economy. It is undeniable that formalization policies are at the centre of the struggle for extending social security coverage to independent workers and therefore should be incorporated into an integrated social security policy framework. For practical purposes, and without going into detail of the analysis of determining factors of coverage or the success of interventions, the following is a list of elements which seem to affect, depending on the national context, the extension of social security to independent workers. a An important factor is the States participation in the subsidizing contributions by low income workers, which allows for the establishment of a progressive compliance system in accordance with contributory capacity. This solidary framework is a stimulus for independent workers‘ registration in social insurance. b Mandatory registration and social security contribution payments on the part of independent workers are also essential requirements in strengthening the framework for universalization of social insurance. In the case of the social insurance systems recently created in the developing world, mandatory social contribution payments must be followed by a series of reforms allowing for follow-up, improvement and adaptation of the management and granting of short term benefits. c The creation of special schemes of differentiated benefits does not seem to be an essential requirement in increasing the coverage of independent workers, but it may work in those countries where these workers have a much reduced contributory capacity, through allowing lower contribution payment levels to be associated with lower differentiated benefits. However, such schemes would have to be transitory and inclined to be coordinated with or integrated into the general schemes as economic and labour market conditions improve. Formalization should therefore translate into better social security coverage conditions. d As regards the design of coverage extension strategies aimed at specific groups of workers such as independent workers, an important step is the identification of territorial distribution, contributory capacity, and mechanisms for labour integration 80 Conclusions for th e target population. The case of Ecuadors Peasants‘ Social Insurance is an important experience in this regard. e An essential factor to foster an environment of trust in the management of social security funds regards the creation of mechanisms enabling the improvement of the systems transparency, especially in terms of financing. The implementation of a robust accountability mechanism is a responsible act which improves the relationship between the system and its contributors. f The establishment of an inspection system allows for reduced rates of social contribution evasion, and increases the systems revenues. On the other hand, it is also important to provide for a beneficiary control mechanism in order to reduce the unnecessary payment of certain benefits. g The introduction of differentiation in the contribution rate paid by independent workers only contributes to a marginal increase in contributions from this group of workers. Differentiation may be established on the basis of lower collecting rates, or with contributions to the system according to the total value of production. h The creation of additional incentives, such as the personal and mortgage credit programmes for workers registered in social insurance, can consolidate coverage extension, and generate trust in the social security system. Generally, credit programmes offer more favourable financing conditions when compared to the credits granted by the banking system. However, they should not weaken the profitability of social security funds. i The creation of an administrative alliance between the tax authority and the body responsible for social security for the establishment of a unified collection basis for taxes and social contributions, like in the case of Uruguays Monotributo allows for extended coverage to those companies which usually pay taxes, but which are outside of the social insurance contributory system, or vice versa . This unified payment mechanism has the advantage of reducing the transaction costs borne by micro businessmen, such as the time and cost of transportation to the place of payment. Frances Auto-entrepreneur, and of Brazils Simples Nacional are example of successes in that area. j The use of mechanisms allowing for the simplification of registration, collection, and service provision is likely to create an increase in registrations in the system, especially in the case of independent workers, for whom taking time out of their work to entails a high economic cost transaction costs. It should be mentioned that administrative simplification also increases administrative efficiency and reduces management costs. k The use of pro-active and proximity approaches with independent workers and their organizations, increases the level of information available to the target group, and indeed society as a whole, on social security, reduces transaction costs of registration and contributions, and favours coverage extension. l The social insurance systems which have established collective mechanisms for registration and collection have benefited greatly from the increase of coverage to independent workers. Innovations in extending social insurance coverage to independent workers 81 Finally, we must highlight the relevance of the political will necessary to implement these types of mechanisms. Generally, such strategies are part of a series of comprehensive structural reforms, and are included into national strategies of formalization of labour, which allow for an increase in contributory coverage. The long-term dividends of such reforms were the incentive that the countries included in this study needed to implement such reforms.