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

Thank you!

Linking SP and return to employment

The most effective & efficient way to protect the unemployed and vulnerable

workers