informality social contract dialogue

Social contracts and social dialogue: A missing link

By Laura Alfers, Director, Social Protection Programme, WIEGO – Women in Informal Employment: Globalizing and Organizing

Social contracts – the implicit agreements between citizens, the state, workers and enterprises on how to distribute power and resources in pursuit of common goals – are leaving too many workers around the globe without access to social or labour protections. And, while much of the debate about how best to provide these protections focuses on issues like financing, appropriate regulation and policy design – something central to the process of social contract formation is often left out or emerges as an afterthought. That is social dialogue.  

Social dialogue is a mechanism for participation and consensus building in the world of work. It may take many forms: from collective bargaining between workers and employers to tripartite processes which include the State. It is a key component of the International Labour Organization’s Recommendation (204) on the Transition from the Informal to the Formal Economy (2015), which states that governments should “create[s] an enabling environment for employers and workers to exercise their rights to organise and to bargain collectively and to participate in social dialogue in the transition to the formal economy.”

Social dialogue can also be defined beyond institutionalised spaces that can lead to enforceable agreements, to more informal consultations and information exchanges. These may include actors outside of the state, formal labour, and business.[1] And this is overwhelmingly the type of social dialogue in which workers in the informal economy engage. Most often, negotiations take place in ad hoc meetings – often arising out of a crisis – or in consultative forums without statutory obligation, and without enforceable agreements or continuity. While dialogues, consultations or meetings to resolve immediate disputes play a role in enabling informal workers to raise their voices and make gains, ad hoc agreements can easily be ignored or undermined.[2]

How can social dialogue result in binding agreements for informal workers?

Progress is often seen when organisations of informal workers ally with, or join, existing social partners, such as trade unions and employers’ organisations. This gives their workers access to existing social spaces, resources and capacities as well as the institutional backing of these (often bigger) organisations and networks. There are several good examples of alliances between trade unions and organisations of informal workers which have allowed for the exercise of voice in policy making and rule-setting processes.[3]

However, integrating organisations of informal workers into trade unions comes with its own risks. Some issues, such as harassment by municipal governments, are less likely to be addressed as priorities because they are localised rather than national issues. Trade unions representing both formal and informal workers may also find themselves conflicted when debating policy proposals where the interests of both groups are not aligned.

Moreover, organisations of workers in the informal economy, particularly those representing the large numbers of self-employed workers, may take alternative forms, such as cooperatives, social movements and network-style formations, which mean they do not fit easily into existing trade union or employer organisation structures. In these situations, the lack of informal workers’ direct representation is not only frustrating but can also complicate the alignment of social contract formation with workers’ every-day realities.  

Steps that can be taken to better include informal workers in formal social dialogue:

1. Securing legal recognition for democratic and representative organisations of workers in the informal economy, including self-employed individuals, is essential.

2. Expanding institutionalised and binding platforms for social dialogue beyond traditional social partners and towards “multi-party bargaining.”[4] A recent ILO publication notes that this has been used effectively by unions representing fruit pickers in the US. This has led to the inclusion of lead firms within supply chains negotiating and facilitating the extension of labour standards to informal workers.

3. Ensuring that spaces for dialogue exist at multiple levels, extending from the transnational[5] to the national and municipal levels in order to include different groups of workers in the informal economy. For example, informal workers who operate in urban public spaces, such as street vendors and waste pickers, may particularly benefit from municipal level social dialogue, while homeworkers in global supply chains may benefit more from the transnational level.[6]

4. Finally, where possible, take proactive steps to include organisations of informal workers within larger organisations, such as trade unions.

Broad-based measures need to be taken within unions to ensure that more vulnerable workers are able to exercise their voice effectively. Such measures could range from capacity building, to ensuring that representatives of informal workers themselves are able to directly communicate with and advise union officials representing workers on relevant issues in institutionalised spaces.

Let’s be clear:

Working towards direct representation should be the goal. As one worker put it during a consultation: “Us, we know the challenges of the informal sector. We know what’s needed for us. [So] We should be speaking on our own behalf.”

The OECD’s new report Informality and Globalisation: In Search of a New Social Contract highlights more important challenges and opportunities related to social contracts today.

[1]Social Dialogue for the Transition From the Informal to the Formal Economy, ILO, November 2020

[2] Chen, M (2022). ‘Self-employment and social contracts from the perspective of the informal self-employed’ in L.Alfers, M. Chen, S. Plagerson (eds.), Social Contracts and Informal Workers in the Global South. London: Elgar.

[3] Interactions Between Workers’ Organizations And Workers In The Informal Economy: A Compendium Of Practices, ILO, 2019

[4] Schmidt, V et al. (2023). Negotiations by workers in the informal economy. ILO Working Paper No. 86.

[5] Von Broembsen. M. 2022. Human rights and transnational social contracts: the recognition and inclusion of homeworkers? In L. Alfers, M. Chen and S. Plagerson (eds), Social Contracts and Informal Workers in the Global South. London: Elgar

[6] Chen, M (2022). ‘Self-employment and social contracts from the perspective of the informal self-employed’ in L.Alfers, M. Chen, S. Plagerson (eds.), Social Contracts and Informal Workers in the Global South. London: Elgar.