How can we extend social protection to workers in the platform economy?  

The platform economy offers great opportunities for economic integration for different groups of workers that would be otherwise excluded. Yet, protection through labor standards and social security remains a key global challenge for workers within the platform economy.  Situated within the legal framework of social insurance in Egypt, this post underscores two policy approaches to the inclusion of platform workers within the social protection purview.  The first extends the existing legal frameworks’ potential by making participation easier and open to own-account workers, such as platform workers, with tax obligations on a voluntary basis. This requires simplifying the enrollment process and eliminating requirements pertaining to business registration and/or syndicate membership. The second policy option is to mandate social insurance contributions, similar to the taxation process, and build an alliance between the two functions of taxation and social insurance contributions. One successful example of this approach is the Monotax regime in Uruguay. The benefits and challenges of each option and the role envisioned for platforms are discussed.

Who are Platform Workers?

This blog adopts Eric Tucker's (2020) definition of platform work, which distinguishes between platform-mediated ground work (typically in transportation/ride hailing and food delivery) and platform-based cloud work (typically online services such as consulting and other technical services). It is important to acknowledge at the outset the power and the great potentials of the platform economy in creating transnational work opportunities and allowing groups of workers with mobility challenges to work (Gerber, 2022), particularly female workers. Platform jobs can offer flexibility and convenience that far exceed the potentials of traditional forms of work.  It has been recognized as central to the understanding of the future of work globally (ILO, 2017). Platforms promise prospects of income generation to workers in less-developed economies, where most people work in low-productivity, low-quality, and often informal jobs (Datta et al., 2023). The virtual nature of some platform work also provides flexibility for often marginalized groups such as women, youth, migrants, and people with disabilities (ibid.). 

There is a sparsity of data on the size of the platform economy and its workers in Egypt. Survey data does not adequately provide insights on this growing phenomenon, which is also absent from national statistics on labor (CAPMAS, 2024). Furthermore, companies, perhaps for fear of competition, do not readily disclose many of their details. 

The Social Protection Challenge of Platform Workers

It is globally recognized that workers on digital platforms often struggle to find sufficient well-paid work to earn a decent income, creating a danger of adding to the working poor (e.g., ILO, 2021, Fairwork, 2023).  The majority do not have access to social protection (ILO, 2021). Data from a global survey of some 12,000 workers in 100 countries around the world shows that only 20% of online workers had access to a pension scheme and only 27% of app-based taxi workers had access to injury insurance (ibid.).  In Egypt, access to social insurance coverage among own-account workers (a group that subsumes platform workers), dropped from 24% in 2009 to 14% in 2021 (Selwanes and Barsoum, 2023). Platform workers have persistent challenges pertaining to uncertain income streams, no clear career pathways, little to no protection against unfair practices, and abuse or injuries while working. Platform work also raises challenges for managing data security and privacy (ibid.).

There are serious repercussions for workers not contributing to social insurance and lack access to any forms of social protection. First, this lack of social protection among those in the working age population could result in a large cohort of an aging population with no access to pension schemes (Behrendt and Nguyen, 2018).  Second, as contributions of workers to social insurance funds fall, the sustainability of the scheme, which is funded with a pay-as-you-go system (Maait and Demarco, 2012) is threatened. When these workers age without contributing to social insurance schemes, they are bound to become a burden on tax funded social assistance systems.

Egypt has one of the oldest social insurance systems in the Middle East region.  The first full-fledged social insurance law was promulgated in 1959 (Garrison, 1978)  The system was modified several times, most recently in 2019 (Law 148), with an explicit objective of expanding coverage and integrating workers employed in the informal economy (NOSI, 2018). Within the Egyptian legal framework, the options available to own-account workers  constitute the key approach for the inclusion of platform workers. The system offers stipulations for own-account workers in two forms, each has its own constraints:

1. First, the law stipulates that highly skilled workers from 15 occupations - including medical doctors, engineers, and artists, amongst others - and owners of registered businesses, are obligated to pay 21% of relevant income brackets. However, enterprise formality (proved by valid business/ professional registration numbers), is a precondition for enrollment for both employees and employers. This results in the exclusion of platform workers from the system. 
2. For workers without registration or work documentation, the legal framework allows for participation on a voluntary basis. However, it also requires documentation of the status of employment (Barsoum and Selwaness, 2022). For this group of irregular own-account workers, the contribution rate is only 9% of monthly wage earnings (or of the minimum wage stipulated by the government) while the government pays the rest of their contribution (12%). While this is a major subsidy, the required documentation makes the registration for some workers to the scheme almost impossible.

Two Policy Options

General considerations for the inclusion of own-account workers, including platform workers, rely on the following: 

1. The implementation of flexible and innovative approaches to include workers that are part-time and short-term. 
2. The facilitation of coverage for workers with multiple employers at the same time (Behrendt and Nguyen, 2018). 
3. Lowering the legal minimum thresholds on working time, earned income and duration of employment.  

In terms of the system’s financial sustainability, a revised policy approach is needed to include this group of workers by tapping into the increased level of contributions to social insurance to increase access to benefits and reduce the requirements for inclusion in social protection schemes.

There are two policy options to improve access to social insurance for  platform workers, with applications in Egypt: 

1. In systems where social insurance for own-account workers is voluntary, similar to Egypt, platform companies can be catalysts for social insurance access.  However, their role is limited to encouraging workers to enroll and offering them possible market options (Behrendt and Nguyen (2018). 

A key challenge to voluntary access to social insurance in Egypt is the administrative burden of system requirements, primarily in relation to business registration (Barsoum and Selwanes, 2022). As noted above, countries such as China (Zhang and Liu, 2024), Thailand, Laos, and Myanmar (Nguyen and da Cunha, 2019) have long decoupled access to social insurance from employee status, offering eligibility to all workers. For example, Thailand offered such a model in 1994 with short-term benefits for the self-employed including sick leave, disability insurance, life insurance, maternity leave and old-age as a lump sum – on a voluntary basis. 

According to data from the International Labor Organization, the voluntary approach has led to the expansion of coverage to this group, with the government subsidizing one-third of contributions to social insurance schemes for workers in the informal economy.  Eligibility for sick leave requires three months of contributions and certain conditions to be met, while life insurance needs 6 to 12 months of contributions. 

2. Similar to taxation, social insurance contributions can be mandatory, pushing all workers, including own-account workers, to enroll. Uruguay’s experience with the Monotax regime for own-account workers, is a key example for this approach of combining tax withholding with social insurance contributions. 

The Monotax is based on an administrative alliance between the tax authority and the social security institution. Introduced in 2001, it simplified and unified collections from micro and small enterprises. The scheme was subsequently reformed in 2007 to make it more effective by eliminating various conditions for joining the scheme, such as place of the activity and type of activity. In 2011, Monotax incentivized participation and extended to coverage for independent workers under one-person enterprises and joint entrepreneurships through lower rates of contribution, particularly in the beginning. 

In systems where insurance for own-account workers is mandatory, platform companies can play the role of administering deductions of contributions to the social insurance system, similar to the income tax system in some countries. In this situation, platforms act as quasi-employers.

Another important classification of social protection is short-term versus long-term insurance packages (e.g. Findley and Caliendo, 2009).  

1. Short-term insurance typically offers protection against life-cycle risks with short-term impact such as temporary sickness, a need to attend to a newborn, work accident, loss of job, or payment upon the death of a breadwinner.  Provisions for these risks are made on a lump sum basis. Recent experiment-design research in Malaysia (Ghorpade et al., 2023) shows that platform workers demand such benefits and that the challenge is primarily in the design of policies that are flexible and accessible to them.
2. Long-term insurance, on the other hand, primarily focuses on pensions during longevity and survivorship. The literature has long grappled with the effect of myopic thinking on the side of contributors, who are often not future-oriented in their priorities and tend to underestimate the importance of social security benefits in an unpredictable future (e.g. Feldstein, 1985). It is, therefore, important for policy design to consider these tendencies. 

The Envisioned Role of Platform Management in both Options

While the relationship between platforms and their workers will continue to be a form of short-term, non-standardized contractual employment relationship, there are two roles envisioned for platforms. In the voluntary approach, as noted above, they can serve as catalysts, promoting different insurance packages (either public or private) to workers. Needless to say, such policies should be flexible and not connected to one specific platform.  While workers could benefit from promotional packages through the insurance carriers, these should not be tied into the continuity of service with this specific platform. Tying the service to the platform would harm the workers and reduce their options to work with other platforms.

In a mandatory approach to social insurance, platforms will play a similar role to that related to income tax. Platforms are progressively being involved in different taxation systems, withholding VAT and income tax in some contexts, with Mexico as key example. This sets a precedence of combining taxation with social protection packages.  

Works Cited

Barsoum, Ghada, 2016a. “The Public Sector as the Employer of Choice among Youth in Egypt:  The Relevance of Public Service Motivation Theory.” International Journal of Public Administration. Volume 39, Issue 3, pages 205-215 (http://www.tandfonline.com/doi/pdf/10.1080/01900692.2015.1004082?needAccess=true)

Barsoum, Ghada. 2016b. A Generation without Work Contracts and Social Security:  The Urgency of Policy Focus on Youth Job Informality in Egypt," in “Generation Awakening: The socio-economic situation of Middle East youth on the eve of the Arab Spring”. Edward Sayer and Tarek Youssef (eds.). Oxford, UK. Oxford University Press

Behrendt C, Nguyen QA (2018) Innovative Approaches for Ensuring Universal Social Protection for the Future of Work. Geneva: International Labour Organization. 

Datta, Namita; Rong, Chen; Singh, Sunamika; Stinshoff, Clara; Iacob, Nadina; Nigatu, Natnael Simachew; Nxumalo, Mpumelelo; Klimaviciute, Luka. Working Without Borders: The Promise and Peril of Online Platform Work. The World Bank. Washington DC, 2023

Fairwork (2023) Fairwork Egypt Ratings 2022/23: Platform workers amidst Egypt‘s Economic Crisis. Oxford, United Kingdom; Berlin, Germany. 

Findley, T. S., & Caliendo, F. N. (2009). Short horizons, time inconsistency, and optimal social security. International Tax and Public Finance, 16, 487-513. 

Garrison, J. L. (1978). Public assistance in Egypt: An ideological analysis. The Middle East Journal, 279–290.

Gerber, C. (2022). Gender and precarity in platform work: Old inequalities in the new world of work. New Technology, Work and Employment, 37(2), 206-230.

Ghorpade, Y., Abdur Rahman, A., & Jasmin, A. (2023). Social Insurance for Gig Workers: Insights from a Discrete Choice Experiment in Malaysia. World Bank. Policy Research Working Post 10629

International Labor Organization. 2017. Strengthening social protection for the future of work (post presented at the 2nd Meeting of the G20 Employment Working Group, Hamburg, 15–17 February). Geneva, International Labour Office.

International Labor Organization. (2021). World employment and social outlook: trends 2021. International Labour Office.

Nguyen QA, da Cunha NMS (2019) Extension of Social Security to Workers in Informal Employment in the ASEAN Region. Bangkok: International Labour Organization.

Tucker, E. (2020). Towards a political economy of platform-mediated work. Studies in Political Economy, 101(3), 185-207.

Zhang, H., & Liu, K. (2024). Can a voluntarist approach to social security extend protection to gig workers? Evidence from the platform-based food-delivery sector in China. Journal of Industrial Relations, online first at https://journals.sagepub.com/doi/10.1177/00221856241262786