The immense economic and social costs of the COVID-19 pandemic are especially onerous for vulnerable populations and the estimated 1.6 million informal workers in the affected countries.  According to the ILO , within the first month of the crisis, these workers suffered a 60% decrease in earnings, and 34% increase in their poverty rate.

In Paraguay, employment is highly informal. Among workers age 15 and older in non-agricultural jobs, 64% hold informal jobs. As in many countries, informality in Paraguay produces groups of workers who are particularly susceptible to exclusion from social welfare systems: women, young adults, and the rural population present rates of informality that are above average, as do workers with little formal education, the self-employed and employees of micro, small, and medium enterprises (MSMEs).  Informal work is concentrated within the agricultural, domestic employment, construction, commerce, gastronomic, manufacturing and personal services sectors.

How can the social security system’s coverage be extended during the middle of a public health and economic crisis?  What are the barriers inhibiting the formalization of employment?  What types of interventions and public policies can accelerate the generation of formal employment as we build back a better economy?

In response to these questions, the Ministry of Labor, Employment and Social Security (MTESS), with the support of the UNDP’s Accelerator Lab, and the ILO, launched one of the first public innovation labs in the country last July: The Participatory Informal Employment Lab.

Structure of the Participatory Informal Employment Lab

This new lab is being launched within the framework of the Integrated Strategy for the Formalization of Employment in Paraguay, led by the MTESS, and has three components:

(1)   An Interdisciplinary Research-Action Team established within the MTESS and comprising two full-time researchers, along with members of the institution’s General Directorate for Social Welfare and Labor Observatory.  This team will receive constant input from the UNDP’s Accelerator Lab and the ILO’s Paraguay office. The principal function of this team will be to generate new data for understanding and tackling the barriers to employment formalization, validating new policy proposals for overcoming these barriers.

(2)   Permanent Focus Group of the Informal Economy, a space dedicated to participatory analysis and dialogue among employers’ representatives, informal workers, civil society, the public sector, and academic actors, as well as others interested in improving social welfare policy.

(3)   Trans-Sectoral Employment Roundtable, a space where we will develop new policy proposals for employment formalization in conjunction with representatives from the Ministry of Industry and Commerce, the State Secretariat for Taxation, the Social Security Institute, and other member institutions of the Executive Committee of Employment Formalization in Paraguay.

Learning to Innovate with Social Security:

How do we generate new knowledge in order to innovate with social security policy?

The lab will launch learning loops with three phases:

1.       Discover the barriers to the formalization of existing jobs and to the generation of new formal employment in specific sectors.  We opted for a focus on value chains, in which we 1) map the structure of production, contracting, and employment within a specific chain, 2) identify the participants of the various linked sectors, 3) analyze informal employment within the aforementioned, and  4) identify the barriers to the formalization of employment.  These activities will combine various qualitative methodologies, such as ethnographic observation, semi-structured interviews, and cultural probes, with the analysis of statistical data obtained from the General Directorate of Statistics, Surveys and Censuses (DGEEG), diverse administrative data, and original surveys.

2.       Explore diverse local, national and international projects and interventions adopted to overcome the identified barriers. Different institutions of the Paraguayan State have already experimented with a variety of approaches to the problem of informality.  The UNDP, the ILO, and other collaborators have accumulated extensive experience on the subject of informal employment in Paraguay and other countries. By compiling, analyzing, and adopting these methodologies and communicating with the institutions that develop them, we will build collective intelligence to identify the best public policies and interventions to meet local challenges.

3.       Test, using innovative methodologies such as Nimble RCTs and regulatory sandboxes, to experiment with the most promising interventions and public policy prototypes in order to generate evidence about their impact on informal employment. There are many promising policy proposals to address informality but whose real-world effectiveness remains uncertain and which require further design research in order to adapt them to Paraguay’s situation and test their practical effects.  Some proposals include a unified tax system and social welfare contribution, a strategy of root-cause labor regulation, curricular innovation in worker training, and the creation of unemployment insurance.

Expected Outputs from the Participatory Informal Employment Lab

The New Members of the Participatory Informal Employment Lab:

Fernando Ovando is an economist from the Universidad Nacional de Asunción with graduate studies in economics from the Universidad Nacional de la Plata, Argentina.  His publications deal with labor markets, poverty, income distribution, fiscal policy, and public finances.  In 2019 he published Understanding the Determinants of Economic Informality in Paraguay A Kaleidoscope of Measures.  Ovando tell us, “I am motivated by the possibility of participating in the design of public policies through an unconventional strategy that  takes a  qualitative, people-centered approach that helps us understand of the behavior of participants in the informal economy and think collaboratively about the kinds of interventions needed to obtain better conditions for workers.”

Georgina Hernandez is a Salvadoran anthropologist with a doctorate in Latin American Studies, Cultural Diversity, and Social Complexity from the Universidad Autónoma de Madrid, Spain.  For her thesis, Hernández applied a methodology of participative social cartographies for socio-environmental change.  She was recently part of the founding team of La Casa Tomada, a project financed by the European Union to create a model cultural ecosystem for the transformation of the economic environment of vulnerable communities within the metropolitan area of San Salvador. Georgina tells us, “I am motivated by the capacity for experimentation shown by the Lab, where the social participants themselves contribute knowledge of the sphere of production, reflect on issues present in their immediate context, and collectively propose, via co-making spaces, solutions for transitioning from informal to formal employment.”

The Lab in Action:

The new Lab’s activities kicked off with an interdisciplinary and interinstitutional orientation provided by the MTESS, the UNDP, and the ILO, and composed of a series of trainings on human-centered design, value chain analysis, the promotion of decent employment in Paraguay, the Integrated Strategy for the Formalization of Employment in Paraguay, Labor Statistics in Paraguay, field experiment methodologies for public policy, and Paraguay’s entrepreneurial ecosystem.

Given that it is one of the sectors with highest rates of informal employment and that it occupies a central place in the National Government’s Plan for Economic Recovery, Napu’a Paraguay, the Lab has chosen to focus the first learning loop on the construction value chains and related industries.  During the following weeks we will begin 1) mapping the value chain through participatory workshops, 2) developing and testing a research plan with industry representatives and workers, and 3) identifying and prototyping some of the most promising interventions to accelerate the recovery of the economy and  of employment, with social security and decent work.  

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