1 the challenge of covering the informal sector: the philippine sss experience corazon s. de la paz...
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THE CHALLENGE OF COVERING THE INFORMAL SECTOR: The Philippine SSS Experience
CORAZON S. DE LA PAZPresident and CEO
Social Security System, Philippines November 30, 2006
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2
Introduction
Strong World Economic Growth
Growth in Formal Sector Employment
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3
Introduction
Rising prosperity and better
opportunities
Many have not shared in the benefits of the progressive world.
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Introduction
Expansion of the Informal Economy: Self-employment Petty trade Domestic service Part-time work Odd jobs without contract
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Introduction
Growth of Informal Sector
Sector where poverty is acute
Extension of social security coverage becomes an even more universal concern
Globalization failed to create enough opportunites
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Philippine Informal Sector
Class of Worker Number ofEmployed (‘000)
Wage and Salary Workers 16,799
Own-Account Workers 12,147
Self-employed 10,847
Employers 1,416
Unpaid Family Workers 3,942
Total Employed 32,888Note: Average of January, April and July 2006 Labor Force Surveys,Philippine National Statistics Office
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Philippine Informal Sector
Distribution of Informal Sector Workers by Industry Group
Services39.1%
Industry5.8%
Agriculture55.1%
Source: July 2006 Labor Force Survey, Philippine NSO
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Philippine Informal Sector
Class of Worker PoorFamilies
Non-poorFamilies
Wage and Salary Workers 35.5 55.8
Own-Account Workers 44.4 34.7
Unpaid Family Workers 20.1 9.5
Total 100.0 100.0Source: Philippine National Statistics Office
(Percent Distribution of Employed Members)
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The Philippine SSS Program
Contingencies covered: Old age Disability Work-related injury Death Sickness Maternity
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The SSS Program Loan Privileges:
• Salary Loans• Housing Loans• Business Loans
Flexi-Fund Program for OFWs• Enrolled 61,070 OFWs as of end-2005• Total member’s equity of US$1.94-M, as of
July 2006
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The SSS Program
Coverage and Membership
Item Number
Registered EE 26,491,399
Covered EE 20,976,613
Self-employed/Voluntary
5,514,786
Registered ER 774,040
As of end-Jun 2006
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The SSS Program
0.0
1.0
2.0
3.0
4.0
5.0
6.0
(In
mill
ions
)
1997 1998 1999 2000 2001 2002 2003 2004 2005 Jun-06
SSS Self-Employed and Voluntary Members
5.6-M
1.7-M
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SSS Membership
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
1997 1998 1999 2000 2001 2002 2003 2004 2005 Jun-06
(In
mill
ions
)
Total SSS Membership
Self-employed/Voluntary Members
The SSS Program
21%8.8%
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The SSS ProgramIssues on Coverage of Informal Sector Willingness to be covered in the first
place Sustainability of member compliance
Enforcement and monitoring of compliance
Irregularity of income flows makes it difficult for workers to meet qualifying conditions for membership or the capacity to sustain monthly contributions
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The SSS ProgramIssues on Coverage of Informal Sector Serious compliance and evasion problem
at SSS Of the total SSS membership only one-
third (8 million) are paying Of the total self-employed less than one-
fifth are paying
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Current Initiatives Branch Tellering
Ability of partner banks to accept payments of SSS SE/VMs is constrained by the bank’s needs to service other and more profitable clients
Designed to facilitate payment of premiums and loan accounts of informal sector workers
Response to the restricted banking hours when SSS payments may be accepted
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Current Initiatives Remittance thru other payment schemes
Self-service facilities like payment kiosks in major SSS branches
“Bayad” Centers or Payment Facilities Collection thru Third Party Agents Payment thru Philpost Payment thru the Internet and ATMs Payment thru SMS (Texting)
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Current Initiatives Payment thru Cooperatives
No employer to act as conduit between the SSS and informal sector workers, hence, more administratively costly
Cooperatives and People’s Organizations play the role of employers for workers in the formal sector
Accreditation of Cooperatives and People’s Organizations
Provide monetary incentives to encourage their members to pay SSS contributions as collecting agents
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Current Initiatives Daily Remittance Scheme
Undertaken in collaboration with the Department of Labor, the Philippine Savings Bank and the Development Bank of the Philippines
Informal sectors are encouraged to make daily deposits in order to cumulate an amount equal to a monthly SSS contribution
Underlying Logic: If given the opportunity, low income households will divert a small level of disposable income from immediate consumption to future expenditure needs
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Current Initiatives Support for Small and Medium Enterprises
SSS supports the development and expansion of the productive capacity of SMEs, export and housing industries, tourism industries and cooperatives
Done thru the: SSS business and social development loans such as
the SME Unified Lending Opportunities for National Growth (SULONG) Program
SSS-GSIS Special Financing Program Financing Program for Tourism Projects Financing Facility for SMEs to support the barangay
micro-business program of the government
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Current Initiatives Quality Service
Additional receiving centers in the metropolis Covenant of Service
Pledge to reduce processing time for benefit claims and loan applications
Bring SSS closer to its long-term vision to deliver “real time” services thru streamlined procedures, effective IT support, and optimal deployment of trained personnel
Substantial reductions in processing time for loans and benefit transactions
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Current Initiatives Increase in Minimum Salary Credit
Higher MSC for SE/VMs from US$20 Objective: To set and maintain a salary
range that is sustainable for contributory social security scheme
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Conclusion
The Challenge of covering the informal sector and
capturing their contributions is formidable.
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Thank You