ILO perspectives on Unemployment Insurance and Asian experiences Celine Peyron Bista ILO Bangkok Decent Work for All ASIAN DECENT WORK DECADE 2006-2015
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)
Concept: Protecting workers and their family against loss of employment and income Promoting active labour Maintaining the market policies for full, unemployed and their productive and fully chosen family in health and employment decency upgrading skills and providing income matching labour security supply/demand UI benefits ALMP
Definitions: Employment Insurance (C.168) • 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
Benchmarks recommended by ILO Convention No.168 Benefits Coverage Maintenance of SS entitlements Income replacement (not less Exclusion: Miss-conduct, Medical insurance, than 50% of previous earning, voluntary leaving without good pension, maternity minimum wage, or minimum reason and family guarantee for living) Special attention: part-time and allowances seasonal workers Allowances: vocational training Exclusion: fail to use and retraining, travel costs to employment and VT services claim benefits Services: job placement and Exclusion: Refuse suitable counseling employment
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: A minimum income Certain forms of Training & support for the basic employment retraining, support un/under-employed in guarantees (e.g. to the creation of the form of cash public works) micro- enterprises … transfers • Social Protection Floor (SPF)
A typology: Examples of mechanisms for informal & formal sector workers Formal sector Informal economy and employees rural workers 1- Protect the Unemployment insurance Minimum income guarantee unemployed Severance payment ( in a Allowances to support income support certain extent) specific expenses (child Social assistance allowance 2- Facilitate return to Employment services: Employment guarantee employment vacancy information, job schemes ALMPs matching, vocational Public Works Programs training (cash and food for work) Support to existing jobs Vocational training and job creation
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 10.0 63.5 formal sector 9.8 63.0 9.5 62.5 9.1 9.0 62.0 8.5 8.5 8.4 Example of Indonesia 61.5 8.1 8.0 61.0 7.5 60.5 7.0 60.0 2007 2007 2008 2008 2009 Feb Aug Feb Aug Feb Informal employment, right scale Unemployment rate, left scale 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 • Unemployment benefits & other income security measures facilitate recovery • 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
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 Percentage of economically active Low legal coverage population legally covered Total Mandatory contributory coverage Sub-Saharan Africa Non-contributory coverage Latin America and the Carribean Voluntary contributory coverage (mostly self-employed) Middle East Asia and the Pacific North Africa CIS Only 20% of economically active population is legally Central and Eastern Europe covered under UI contributory and non contributory North America schemes in Asia Western Europe 0 10 20 30 40 50 60 70 80 90 100 Legal unemployment coverage as a percentage of EAP Reasons: • Small number of countries have established UI/Assistance • The % of legally covered population is limited (from 1% in India to 84% in Japan… )
Existing situation in Asia Low effective coverage Total Only 10% of unemployed effectively receive UI Africa benefits in Asia from contributory and non Arab States contributory schemes Latin America and the Carribean Contributory schemes Asia Non-contributory schemes Central and Eastern Europe Number of persons receiving CIS unemployment benefits North America among total unemployed Western Europe 0 10 20 30 40 50 60 70 80 90 100 Reasons: Percentage • 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
The inadequacy of protection under the severance pay system • 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 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
Various models in Asia High Singapore (no UI, but full Japan (Hello Work) employment Active Labour Korea (EI model) strategy ) Market Policies: job centers, training, China (since 1986 all urban India (Employment retraining … workers; Job Centers at allowance added to the provinces, cities and districts + SSS but benefits are low community) and coverage is limited; NREGS initiative) Philippines, Malaysia (Severance pay system) Low Low High Passive Labour Market Policies: unemployment or severance pay
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
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