ILO perspectives on Unemployment Insurance and Asian experiences - - PowerPoint PPT Presentation

Decent Work for All ASIAN DECENT WORK DECADE 2006-2015

ILO perspectives on Unemployment Insurance and Asian experiences

Celine Peyron Bista ILO Bangkok

Structure of the presentation

• I. ILO’s Perspectives on UI/EI
• Definition, concept, ILO C.168 for benchmarks
• Existing mechanisms and typology of programs
• II. (Un)Employment Benefits in Asia
• Growing recognition
• Asian experiences
• III. Conclusions and way forward

Structure of the presentation

• I. ILO’s Perspectives on UI/EI
• Definition, concept, ILO C.168 for benchmarks
• Existing mechanisms and typology of programs
• II. (Un)Employment Benefits in Asia
• Growing recognition in Asia
• Asian experiences
• III. Conclusions and way forward

ILO social security standards related to unemployment insurance

 Social Security (Minimum Standards) Convention, 1952 (No. 102)  Employment Promotion and Protection against Unemployment Convention, 1988 (No. 168)  Employment Promotion and Protection against Unemployment Recommendation, 1988 (No. 176)

Maintaining the unemployed and their family in health and decency

providing income

security

UI benefits

Concept: Protecting workers and their family against loss of employment and income

Promoting active labour market policies for full, productive and fully chosen employment

upgrading skills and

matching labour supply/demand

ALMP

• Unemployed: not working, capable to work

and willing to work.

• Social insurance principle (pooling risks)
• Periodical payment (limitations of the on-

time severance payment)

• Employment promotion
• Skills development and employability

Definitions: Employment Insurance (C.168)

Benefits Coverage Maintenance of SS entitlements Income replacement (not less than 50% of previous earning, minimum wage, or minimum guarantee for living) Exclusion: Miss-conduct, voluntary leaving without good reason Special attention: part-time and seasonal workers Medical insurance, pension, maternity and family allowances Allowances: vocational training and retraining, travel costs to claim benefits Exclusion: fail to use employment and VT services Services: job placement and counseling Exclusion: Refuse suitable employment

Benchmarks recommended by ILO Convention No.168

Unemployment benefit schemes

• Different types of schemes:
• contributory UI schemes
• employment-related social assistance that

steps in when the unemployed are no longer eligible for UI, or for young new entrant

• non-contributory, tax financed social

assistance, instead of insurance for universal minimum living guarantee.

Need for other income support measures for vulnerable workers

• The long-term solution relies on :

– Sustainable employment-generating policies – Adapted ALMPs including:

• Social Protection Floor (SPF)

A minimum income support for the un/under-employed in the form of cash transfers Certain forms of basic employment guarantees (e.g. public works) Training & retraining, support to the creation of micro-enterprises …

A typology: Examples of mechanisms for informal & formal sector workers

Formal sector employees Informal economy and rural workers 2- Facilitate return to employment ALMPs Employment services: vacancy information, job matching, vocational training Support to existing jobs and job creation Employment guarantee schemes Public Works Programs (cash and food for work) Vocational training Unemployment insurance Severance payment (in a certain extent) Social assistance Minimum income guarantee Allowances to support specific expenses (child allowance 1- Protect the unemployed income support

Structure of the presentation

• I. ILO’s Perspectives on UI/EI
• Definition, concept, ILO C.168 for benchmarks
• Existing mechanisms and typology of programs
• II. (Un)Employment Benefits in Asia
• Growing recognition in Asia
• Asian experiences
• III. Conclusions and way forward

Growing recognition in Asia

• Vulnerable employment increased in South

East Asia as a consequence of laid offs in formal sector

9.8 9.1 8.5 8.4 8.1 7.0 7.5 8.0 8.5 9.0 9.5 10.0 2007 Feb 2007 Aug 2008 Feb 2008 Aug 2009 Feb 60.0 60.5 61.0 61.5 62.0 62.5 63.0 63.5 Informal employment, right scale Unemployment rate, left scale

Example of Indonesia

Need for Unemployment benefits

Growing recognition in Asia

• After the crisis job creation was mainly in

vulnerable employment

vulnerable employment still more than 60% of EAP in ASEAN in 2010

Need for specific income security measures for workers in vulnerable employment

Growing recognition in Asia

• Addressing youth unemployment

Need for matching labour supply and demand for youth unemployed

Growing recognition in Asia

• Smooth consumption >>> faster recovery
• Boost domestic demand for goods and

service >>> less dependency on exports

• Need for more protection in context of

Labour Law reform towards more flexibility in hiring and firing

• Unemployment benefits & other income

security measures facilitate recovery

UI/EI schemes in Asia and the Pacific

Malaysia, Philippines, Lao, Cambodia, Indonesia, Myanmar … have no unemployment scheme India, Mongolia, China, Thailand, Korea, Japan, Viet Nam have established (Un)Employment Insurance New Zealand and Australia have Unemployment Assistance

Existing situation in Asia

10 20 30 40 50 60 70 80 90 100

Western Europe North America Central and Eastern Europe CIS North Africa Asia and the Pacific Middle East Latin America and the Carribean Sub-Saharan Africa Total

Legal unemployment coverage as a percentage of EAP

Mandatory contributory coverage Non-contributory coverage Voluntary contributory coverage (mostly self-employed)

Only 20% of economically active population is legally covered under UI contributory and non contributory schemes in Asia

Low legal coverage

Reasons:

• Small number of countries have established UI/Assistance
• The % of legally covered population is limited (from 1% in India to

84% in Japan… )

Percentage of economically active population legally covered

Existing situation in Asia

10 20 30 40 50 60 70 80 90 100 Western Europe North America CIS Central and Eastern Europe Asia Latin America and the Carribean Arab States Africa Total Percentage

Contributory schemes Non-contributory schemes

Only 10% of unemployed effectively receive UI benefits in Asia from contributory and non contributory schemes

Low effective coverage

Reasons:

• Low enforcement : Lack of awareness (of workers) & Evasion from the law

(employers side) e.g. under-declaration of employees

• Workers on short term contract, LT unemployment are not covered

Number of persons receiving unemployment benefits among total unemployed

The inadequacy of protection under the severance pay system

Limitations:

• Employers facing difficulties may evade the law
• Not in accordance with international standards (lump-

sum)

• Total burden on the employer, no risk sharing
• Adverse selection in hiring decisions
• Lump sum paid by employer equivalent to several

months’ salary to workers at termination of a contract

EXAMPLE: Philippines, 1 month’s salary for every year of previous employment

Passive Labour Market Policies:

unemployment or severance pay

Active Labour Market Policies: job

centers, training, retraining … High Low High Low

Philippines, Malaysia (Severance pay system) India (Employment

allowance added to the SSS but benefits are low and coverage is limited; NREGS initiative)

China (since 1986 all urban

workers; Job Centers at provinces, cities and districts + community)

Singapore (no

UI, but full employment strategy )

Various models in Asia

Korea (EI model) Japan (Hello Work)

An integrated model: employment insurance (Korea, Japan)

UI benefits combined with employment services :

• Assistance in searching for new jobs
• Counseling
• Training & retraining
• Job creation programs at enterprise

level

Extension of coverage (Korea, Japan)

• Recent extension to all persons seeking employment:
• Japan: Oct. 2011, law amendment to provide access to “Hello

Work” services to ALL workers

• Korea: Nov. 2011, extension to self-employed workers

Youth unemployment benefits in Bahrain

• Income support for first time jobseekers (> 18

years old)

• Aid benefits: for holders of academic

qualifications (USD 345 per month), for 6 months maximum

• Access to Employment Services Bureau
• Access to vocational training (Bharain Training

Institute)

Structure of the presentation

• I. ILO’s Perspectives on UI/EI
• Definition, concept, ILO C.168 for benchmarks
• Existing mechanisms and typology of programs
• II. (Un)Employment Insurance in Asia
• Crisis recovery and justification for UI & EI
• Asian experiences
• Examples of Korea and Japan’s EI models
• III. Conclusions and way forward

Formal sector employees Informal economy and rural workers 2- Facilitate return to employment through employment services and other ALMP Employment services: vacancy information, job matching, vocational training Support to existing jobs and job creation Employment guarantee schemes Public Works Programs (cash and food for work) Vocational training Unemployment insurance (UI) cash benefits Minimum income, cash transfers 1- Protect the unemployed through income support measures

ASEAN UI project

• COMPONENT 1- Produce research, raise awareness, share information
• n all measures and schemes to address the problem of income insecurity

in the formal sector and the informal economy in ASEAN countries

Formal sector employees Informal economy and rural workers 2- Facilitate return to employment through employment services and other ALMP Employment services: vacancy information, job matching, vocational training Support to existing jobs and job creation Employment guarantee schemes Public Works Programs (cash and food for work) Vocational training Unemployment insurance (UI) cash benefits Minimum income, cash transfers 1- Protect the unemployed through income support measures

ASEAN UI project

• COMPONENT 2- Support the further development of the UI scheme in

Viet Nam and enhance linkages with employment services in the country

Formal sector employees Informal economy and rural workers 2- Facilitate return to employment through employment services and other ALMP Employment services: vacancy information, job matching, vocational training Support to existing jobs and job creation Employment guarantee schemes Public Works Programs (cash and food for work) Vocational training Unemployment insurance (UI) cash benefits Minimum income, cash transfers 1- Protect the unemployed through income support measures

ASEAN UI project

• COMPONENT 2- Support the further development of the UI scheme in

Viet Nam and enhance linkages with employment services in the country

Formal sector employees Informal economy and rural workers 2- Facilitate return to employment through employment services and other ALMP Employment services: vacancy information, job matching, vocational training Support to existing jobs and job creation Employment guarantee schemes Public Works Programs (cash and food for work) Vocational training Unemployment insurance (UI) cash benefits Minimum income, cash transfers 1- Protect the unemployed through income support measures

ASEN UI Project

• COMPONENT 3- Build capacities and develop exchange of know-how

among ASEAN countries in the field of unemployment cash benefit schemes for formal sector employees and employment services

Feasibility studies for UI system in the region

• Malaysia
• Indonesia

Process includes:

• Learning from international experiences
• Consultations with social partners, awareness raising and

capacity building activities to reach national consensus on the design

• Legal, institutional (operational) and actuarial assessments

Way forward, key issues in the region

• Moving from severance pay to UI, relevance for ASEAN

countries.

• ALMPs, what would work for the ASEAN economies?
• Income security and employment guarantee for the

informal economy workers, recommendations for innovative measures.

• What is to be learnt from ASEAN UI experiences?

Key messages

1. UI+ES is the most efficient combination to provide income security to the unemployed 2. Innovative measures to protect informal economy, rural workers and youth unemployed are needed 3. Establish integrated services (SWS) 4. Providing higher level of social protection through sustainable and decent employment

Thank you!

Linking SP and return to employment The most effective & efficient way to protect the unemployed and vulnerable workers