The social and solidarity economy (SSE) promotes decent work and provides a pathway to formalization for workers in informal employment. But what does formalization of informal work through SSE entities look like in practice? And how can governments support the social and solidarity economy to achieve decent work?
What is formalization?
The formalization of employment refers to progressive access to the rights and benefits associated with full employment, including minimum social protection floors, labour law coverage, and fair incomes and working conditions.
Workers in informal employment – as well as their organizations such as cooperatives – require formal recognition, which can apply at both individual and collective levels. For individual workers, formal recognition may occur through the expansion of labour regulation or labour laws to include sectors that have historically been excluded. It can also take place when social, economic or municipal policies explicitly recognize and protect the rights of workers in the informal economy.
Around the world, workers in informal employment face multiple structural, regulatory and economic barriers to formalization, making this transition complex and uneven. Street vendors, for example, are mostly excluded from traditional financial systems. Banks largely refuse these own-account workers credit and conventional savings mechanisms do not suit their irregular incomes. Their ability to conduct their work effectively is often hindered by city zoning ordinances that restrict vendors to areas that do not suit them or their customers.
Recent International Labour Organization (ILO) instruments speak to the multifaceted and interrelated drivers of informality. For example, the Resolution concerning the general discussion on addressing informality and promoting the transition to formality for decent work outlines four pillars it considers prerequisites for the transition to formality. One of these pillars is the creation of an enabling environment to accelerate the transition to formality.
How can governments create an enabling environment for the social and solidarity economy?
The same ILO instrument outlines measures that governments can put in place to create an enabling environment for the social and solidarity economy, for example through determined action to reduce poverty, advance decent work, extend social protection, and enhance productivity through investment. Drawing on cooperatives’ experiences along with the ILO’s recommended measures, these interventions are among the most vital for SSE entities:
- Design a policy ecosystem specifically for SSE entities. This means recognizing that cooperatives, associations, mutuals and other solidarity-based organizations should be assessed through new legal frameworks that are coherent and stable and allow them to operate in accordance with their democratic governance, social purpose and distinctive ways of distributing and reinvesting surpluses.
- It is essential that governments enable SSE entities to participate in public procurement and purchasing. Taking part in public markets – through quotas, reserved windows or social criteria in procurement processes – is a powerful way to improve incomes, ensure stability and scale up local initiatives. For many groups of workers in informal employment, access to public procurement represents the difference between precarious survival and long-term economic sustainability.
- Tax regimes matter. Recognizing cooperatives’ social contribution as well as their limited financial capacity, particularly in their early stages, governments can create an enabling environment through flexible and context-sensitive tax arrangements. By contrast, heavy tax burdens or the application of rules designed for large private enterprises can be direct barriers to formalization and SSE entities’ long-term sustainability.
- Finally, access to appropriate credit – under conditions aligned with workers’ real income flows – makes it possible for cooperatives to invest in tools, infrastructure and other means to increase productivity, and social protection for their members. State-supported credit and financing mechanisms, adapted for SSE entities, can provide this access, as well as public development banks, cooperative banks, and solidarity finance institutions. This would also reduce workers’ dependence on informal and often abusive forms of borrowing.
Together, these elements define an enabling policy environment that understands formalization not as a purely administrative procedure, but as a progressive, collective and rights-based process. Within such a framework, the social and solidarity economy ceases to be marginal or residual and is consolidated as a strategic actor for expanding decent work and building a fair transition out of the informal economy.
What actions are countries taking to promote formalization through the social and solidarity economy?
With appropriate economic, legal and institutional conditions in place, the social and solidarity economy becomes a platform that enables progress in at least three core dimensions of decent work. First, and critically important, is access to social protection, either by facilitating affiliation with existing public systems or through solidarity-based and mixed schemes that expand coverage to groups excluded by State or market-based programmes.
For example, in Colombia, the government is in the process of issuing a national decree to create a social protection system specifically for waste pickers, which involves the cooperatives they have formed. This access to pensions and healthcare will improve the lives of waste pickers enormously in Colombia where 16 million of the country’s 20 million waste pickers are in informal employment and have none of the benefits enjoyed by workers who are formally employed.
Second is representation and participation, as SSE entities strengthen workers’ collective voice and enable their participation in social dialogue, local governance and relevant policy-making spaces.
In Zambia, market traders and street vendors in cooperatives hope to benefit soon from access to pensions for the first time. Early in 2026, the Zambia Micro and Small Traders Foundation Cooperative Society Limited and the Zambia National Marketeers Credit Association signed a memorandum of understanding with the Ministry of Labour and Social Security to implement a national strategy for extending social security coverage to workers in the informal economy.
Third, the social and solidarity economy makes it possible to improve incomes and working conditions substantially by organizing production collectively and generating greater economic stability. In Argentina, for example, cooperatives have increased textile workers’ bargaining power through producing collectively in production hubs and selling directly to buyers.
With support from governments, countries including Argentina, Brazil, Colombia, South Africa and India are showing that cooperatives can offer a structured pathway to decent work. With strategic government actions to create an enabling environment, cooperatives and other SSE entities can build more dignified and productive working conditions for workers in informal employment.