Question

1. Ghana currently does not have unemployment benefit system as a social insurance. It can be argued that, Government had to ease restrictions on movement just after 21 days of a partial lockdown in the country because the consequences for the informal economy would have been dire.

1. Do you think instituting unemployment benefit for informal sector workers is necessary at all? Explain
2. Suggest to government four modalities for establishing such a social insurance scheme for informal sector workers in case of unemployment and future pandemics

Answer 1

a. It is necessary to institute unemployment benefit for informal sectors as well. One of the main reasons to do this is because informal sector comprises of a large share of economic activity in various economies. In such cases, if unemployment benefits are not provided to the informal sector, then they do not have a safety net. Especially during times like this pandemic, there will be an adverse impact on the informal sector and if the informal sector is a huge part of the total economic activity, then the economy suffers a huge blow. It is essential to have these benefits for the informal sector because in developing economies a huge part of the population gets absorbed into the informal sector.

b. The modalities for ensuring a social insurance scheme:

1. The government should first set up a proper authority to account for the contributions of the sector so that they can easily provide social insurance schemes which will provide relief to the informal sector.

2. There are health insurance schemes catering to a large part of the population in Ghana but there is a need to expand the insurance schemes to cater to other areas as well. A well designed insurance scheme will provide a safety net to the informal sector and help them escape poverty.

3. It is usually seen that the social benefits are limited and do not cover various benefits like safe drinking water or nutrition. This is because it is often difficult to mandate contributions for funding these benefits. This is why there is a need for the government to transfer a certain amount of funds for social security.

4. There is also a need to extend the social insurance scheme benefits to women. Though women face more risks than men, they are often excluded from these benefits.

This way when the informal sector is also provided with social insurance schemes and monitored, it will help convert the informal sector into formal sector. This will ultimaty help economies revive in case of future pandemics.