Social Dialogue to Achieve the Sustainable Development Goals: Formalising the Informal Economy in Costa Rica (SDGs 1, 5, 8 and 10)

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Description

Intro

In Costa Rica, until recently, there was a notable lack of any policy aimed specifically at addressing the informal economy. In October 2016, the government, employers', and workers' organisations adopted the Tripartite Agreement for the Implementation of ILO Recommendation 204 on the Transition from the Informal to the Formal Economy. A process of social dialogue was then initiated to jointly draw up a national strategy and an action plan to implement the content of the Recommendation. The Tripartite Agreement signed reflects the convergence of the various social partners' interests with regard to the informal economy.

Objective of the practice

The main objective was the formalisation of the informal economy in Costa Rica (related to SDGs 1, 5, 8 and 10). The first step in this sense was the signature of a tripartite agreement, which paved the way to the elaboration of a National Strategy for the Formalisation of the Informal Economy. Formulating the national strategy through social dialogue provided an opportunity to close knowledge and information gaps on the subject; to harmonise concepts and criteria; to establish priorities and to draw up joint proposals based on the needs and interests of the various social partners. 
Building the National Strategy for the Transition from the Informal to the Formal Economy has been a politically and technically challenging task for the various actors. To face the different challenges, the following measures were undertaken: 
a) The establishment of social dialogue structures (a high-level roundtable and thematic technical roundtables); 
b) The development of the social partnersâ€™ capacities prior to the negotiation and consensus-building phase; 
c) The identification of the priority areas; and 
d) The adoption of a methodology to facilitate the social dialogue process.

Partners

The main stakeholders involved were:
The workers' organisations: CMTC, CCJM, CTRN, CCTD, CUT and CGT;
The employers' organisation: UCCAEP;
The International Labor Organisation's subregional office;
Government entities: the Ministry of Labour and Social Security, Ministry of Economics Industry and Trade, the Ministry of Finance, the Costa Rican Social Security Fund, the National Institute for Vocational Training, and the National Institute for Women.
The main beneficiaries have been informal economy workers and informal economic units in Costa Rica.

Implementation of the Project/Activity

The National Strategy for the Transition to the Formal Economy was elaborated through social dialogue. According to the International Labor Organisation (ILO), social dialogue refers to all types of negotiation, consultation or information sharing among representatives of governments, employers and workers or between those of employers and workers on issues of common interests relating to economic and social policy. It can be bipartite, between workersâ€™ and employersâ€™ (which the ILO refers to as the social partners), or tripartite, including government, and can take place at national, sectorial and enterprise level. Tripartite social dialogue brings together the social partners to discuss public policies, laws and other decision making that affect the workplace or interests of workers and employers. It is both a means to achieve social and economic policy and an objective in itself, as it gives people a voice and stake in their societies and workplace.
The implementation and monitoring of the strategy is done in a tripartite way involving the workersâ€™ and employersâ€™ organisations as well as the relevant Government structures. Tripartite Technical Commissions have been designated by a Tripartite Roundtable for the Transition to Formality, which is the high level tripartite structure in the governance of the Strategy. The Tripartite Technical Commissions meet every three months to follow-up the actions which have been defined in the Strategy. A Technical Secretariat supports the work of the Tripartite Technical Commissions. The Technical Secretariat elaborates a progress report every six months, in consultation with the Tripartite Technical Committee and the Tripartite Roundtable for the Transition to Formality.
An evaluation of the Strategy will be undertaken 18 months after its launch. This evaluation will be undertaken in consultation with the most representative workersâ€™ and employersâ€™ organisations represented in the Tripartite Roundtable for the Transition to Formality.

Results/Outputs/Impacts

Although the National Strategy for the Transition to the Formal Economy has only recently been signed, there are four main axis in which concrete results are expected:
1. Vocational training: improve the supply of educational services for workers in the informal economy for their effective transition to formality:
a.) Implementation of a National Employment Survey System that offers information about the labour marketâ€™s needs in terms of vocational training.
b.) Improvement of informal workersâ€™ access to and perseverance within the vocational training system.

2. Social protection: increase the social security coverage of prioritised groups, including independent workers:
a.) Increase social security protection for groups with low coverage through new forms of insurance and the strengthening of existing mechanisms to encourage their use and avoid abuses.
b.) Improved capacity of labour inspection for the compliance with labour rights in economic units of sectors of activity with a greater degree of informality.
c.) Design of a model of progressive inclusion in the social security system for microenterprises operating informally.

3. Simplified administrative procedures: reduce the obstacles to the formalisation of economic units and employment at national and local level:
a.) Develop a national plan for improved regulations and to simplify administrative procedures.
b.) Increase the number of municipalities that implement a one-stop-shop model for formalising informal economy workers, companies and economic units.
c.) Promote spaces for exchanges on innovative practices to facilitate administrative procedures through normalisation processes, awareness raising, training and legal advice.

4. Simplified tax: Facilitate access for informal economy companies and economic units to the contributory fiscal system through the generation of mechanisms and regimes that are adequate for their economic activities, the promotion of information and contributory education and the implementation of pilot plans with incentives for formalisation
a.) Design of an integrated and progressive fiscal and social contributory scheme that promotes the formalisation of informal microenterprises and encourages microenterprises in the formal economy.
b.) Improvement and increase of existing simplified tax system mechanisms, especially for sectors and groups of workers with higher informality.

Enabling factors and constraints

A key contributor to the effectiveness of social dialogue is the methodology used to facilitate the process. In this respect, in putting forward the National Strategy for the Transition to the Formal Economy, the social partners agreed that the strengths of this experience had been the following:
a) Clear delimitation of the purpose, objectives and expected outcomes.
b) Organisation of political and technical bodies with distinct tasks, which expedited the analysis and formulation of proposals as well as the decision-making processes.
c) Setting of relatively short deadlines, as a way of preventing absenteeism and a loss of interest among the participants.
d) Technical assistance for each group through the hiring of outside consultants and the establishment of a Technical Secretariat, under the auspices of the Ministry of Labour and Social Security, to convene the representatives and to follow up on the agreements.
e) Facilitation and moderation of the dialogue by a neutral body such as the ILO, which brings legitimacy to the project, as well as the technical elements required to guide the discussions.
f) The convening and inclusion of officials and representatives from forums addressing similar themes, to ensure the consistency of the positions and proposals presented.

Sustainability and replicability

For the sustainability of the Strategy and in order to keep the issue of the informal economy on the public agenda, the actors considered it crucial that the said strategy be endorsed by tripartite bodies, and that the initiatives be integrated within the institutional programmes, plans and policies of the bodies responsible for its implementation.
In this respect, the adoption of the Strategy by bodies such as the High Labour Council, the management boards of the Costa Rican Social Security Fund and the National Learning Institute (the aspects that fall within their remit), and the Presidential Councils for Competition and Innovation, have given the Strategy greater legitimacy and increased its prospects of being carried forward by a new administration.
Another mechanism to ensure the sustainability of the results arising from this social dialogue process is the incorporation of the actions within the institutional programmes of the relevant bodies, as well as within the new National Development Plan (2019 â€“ 2022), a measure that public officials are in a position to promote.
Finally, it should be pointed out that the development of tripartite proposals to reduce informality has not been limited to the Roundtable for the Transition from the Informal to the Formal Economy, and the issue is also being addressed in other social dialogue processes.

Conclusions

The social dialogue process generated by the Tripartite Agreement for the Implementation of ILO Recommendation 204 brought together a range of institutions with a view to tackling the informal economy and developing a short and medium term strategy, mobilising efforts and resources around relevant and viable proposals for the institutions involved in the process. 
The National Strategy for the Transition to the Formal Economy constitutes a key instrument for placing the issue on the public agenda, raising the commitment levels of the various social partners, and promoting a range of initiatives capable of preventing and reducing informality. 
The initiatives developed under the National Strategy are in line with the SDGs, particularly in terms of promoting gender equality (SDG 5) and decent work (SDG 8) for vulnerable groups such as domestic workers, indigenous peoples, migrant labourers working in the coffee sector and low-income self-employed workers, by broadening access to social protection (SDG 10). 
In addition, support measures for production units operating informally include greater access to vocational training, temporary exemptions from social contributions and reduced administrative costs thanks to simplified procedures. These measures contribute to the empowerment and economic inclusion of groups with scarce resources (SDG 1), as well as to reducing the equality gap between formal and informal employment (SDG 10). 
The process of implementation of the National Strategy is not yet complete. It would be therefore premature to draw any conclusions regarding the results and the impact achieved in terms of preventing and reducing informal economy activity in Costa Rica. However, the actors engaged consider that the process has been an opportunity to contribute to the formulation of a first national public policy on the informal economy.

Other sources of information

Costa Rica social dialogue and formalisation country brief: https://www.ituc-csi.org/IMG/pdf/costa_rica_-_reader_friendly_-_en.pdf

Costa Rica: building a national strategy for the transition from the informal to the formal economy through social dialogue: https://www.ituc-csi.org/IMG/pdf/sd_informality_costa_rica_en.pdf

Costa Rica National Strategy for the Transition to the Formal Economy (in Spanish): http://www.mtss.go.cr/elministerio/biblioteca/documentos/economia_infor…

Social dialogue as a driver and governance instrument for sustainable development: https://www.ituc-csi.org/issue-paper-social-dialogue-development

SDGS & Targets