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
8.58.4
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
0 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 contributorycoverage
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
0 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 on 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