social protection in case ofsocial protection in case of ... › fileadmin › fb4 › prof › vwl...

Social Protection in Case ofSocial Protection in Case ofSocial Protection in Case of Social Protection in Case of Unemployment in the Unemployment in the

PhilippinesPhilippines-- Feasibility StudyFeasibility Study ---- Feasibility Study Feasibility Study --

ILO ILO –– DOLE 2010DOLE 2010A l W bA l W bAxel WeberAxel Weber

04/06/2010 Presentation Axel Weber at ADB 27 May 2010 1

StructureStructureStructureStructure•• BackgroundBackground•• BackgroundBackground•• The Labor Market in The Labor Market in thethe PhilippinesPhilippines•• SocialSocial ProtectionProtection FeaturesFeatures•• EmploymentEmployment protectionprotection•• EmploymentEmployment protectionprotection•• Design FrameworkDesign Framework•• Quantitative Quantitative scenariosscenarios•• DiscussionsDiscussions andand ReactionsReactions•• DiscussionsDiscussions andand ReactionsReactions•• ConclusionConclusion04/06/2010 Presentation Axel Weber at ADB 27

May 2010 2

BackgroundBackgroundBackgroundBackground•• The Philippines does have a social protection frameworkThe Philippines does have a social protection frameworkThe Philippines does have a social protection frameworkThe Philippines does have a social protection framework•• But no formal protection in case of unemployment But no formal protection in case of unemployment –– except except

public servantspublic servantsh d l b lh d l b l•• However, it has a rigid labor lawHowever, it has a rigid labor law

•• With the recent global financial crisis With the recent global financial crisis GoPhGoPh in early 2009 in early 2009 promoted the idea of unemployment insurancepromoted the idea of unemployment insurancepromoted the idea of unemployment insurance promoted the idea of unemployment insurance

•• Idea welcomed by stakeholders but no agreement on howIdea welcomed by stakeholders but no agreement on how•• Various proposalsVarious proposals•• ILO extended support to conduct an assessment on the ILO extended support to conduct an assessment on the

feasibility of introducing an unemployment insurance system in feasibility of introducing an unemployment insurance system in the country together with DOLE. the country together with DOLE. t e cou t y toget e t Ot e cou t y toget e t O

•• Study undertaken in 2009. National conference on 17 November Study undertaken in 2009. National conference on 17 November 2009. Forum on 15 March 2010.2009. Forum on 15 March 2010.


The Labor MarketThe Labor MarketThe Labor MarketThe Labor Market



35%

50% Agriculture

15%

Agriculture

Industry

Services



8

8,5

7

7,5

8

6

6,5

5

5,5

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan AprJan 05

Apr 05

Jul 05

Oct 05

Jan 06

Apr 06

Jul 06

Oct 06

Jan 07

Apr 07

Jul 07

Oct 07

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09



•• To a large extent not formalized. To a large extent not formalized. •• 9 5 million people or 25% covered by social9 5 million people or 25% covered by social•• 9.5 million people or 25% covered by social 9.5 million people or 25% covered by social

insurance. 75% informal sector.insurance. 75% informal sector.30% f h l b f i h f l30% f h l b f i h f l•• 30% of the labor force in the formal sector 30% of the labor force in the formal sector works in establishments with less than 10 works in establishments with less than 10

llemployeesemployees•• Including the informal sector, nearly 80% of Including the informal sector, nearly 80% of

workers are in establishments of less than 10 workers are in establishments of less than 10 employees.employees.


ExistingExisting SocialSocial ProtectionProtectionExistingExisting SocialSocial ProtectionProtection•• In the case ofIn the case of unemplomentunemploment somesome•• In the case of In the case of unemplomentunemploment some some

protectionprotectionGSIS ( bli t 50% 6 th )GSIS ( bli t 50% 6 th )–– GSIS (public servants, 50%, 6 months)GSIS (public servants, 50%, 6 months)

–– Severance paySeverance pay–– Loan (80% of the savings) Loan (80% of the savings) PagPag--IbigIbig–– LLoanoan from SSS (maximum 24 000from SSS (maximum 24 000 PhPPhP))LLoanoan from SSS (maximum 24,000 from SSS (maximum 24,000 PhPPhP))–– 3 months PhilHealth3 months PhilHealth

A i t f PESO ffi d fA i t f PESO ffi d f–– Assistance from PESO offices and from Assistance from PESO offices and from TESDA (job facilitation and training).TESDA (job facilitation and training).


ExistingExisting EmploymentEmploymentgg p yp yProtectionProtection

hh ff•• ConstitutionConstitution: : RightRight of of tenuretenure•• LaborLabor codecode: 6: 6 monthsmonths probationprobation periodperiod,,Labor Labor codecode: 6 : 6 monthsmonths probationprobation periodperiod, ,

afterwardsafterwards retrenchmentretrenchment onlyonly ifif goodgoodreasonsreasonsreasonsreasons

•• Practice: Practice: temporarytemporary employmentemployment, , resistanceresistance toto formalizationformalization, , evasionevasion

•• FlexibilityFlexibility ofof laborlabor marketmarket prepre--conditioncondition•• FlexibilityFlexibility of of laborlabor marketmarket prepre conditionconditionforfor UI UI andand forfor structuralstructural changechange


ProposedProposed Design Design pp ggFrameworkFramework

•• Proposal is to gradually include all salariedProposal is to gradually include all salaried•• Proposal is to gradually include all salaried Proposal is to gradually include all salaried workers in a schemeworkers in a schemeBased on ILO Con entionsBased on ILO Con entions•• Based on ILO Conventions Based on ILO Conventions –– 102 (Social Security), 102 (Social Security),

8 ( l )8 ( l )–– 168 (unemployment protection) , 168 (unemployment protection) , –– 158 (termination of employment)158 (termination of employment)

•• Problem: Informal sector and Problem: Informal sector and compliancecompliancecompliancecompliance


ContCont Design FrameworkDesign FrameworkContCont. Design Framework. Design Framework

•• Coverage:Coverage:–– To start with SSS and GSIS members and withTo start with SSS and GSIS members and with–– To start with SSS and GSIS members and withTo start with SSS and GSIS members and with–– Employees in establishments with 10 and more Employees in establishments with 10 and more

staffstaffstaffstaff–– To gradually extend to othersTo gradually extend to others

•• Financing:Financing:•• Financing:Financing:–– Contributions (initially 2%) shared by employer Contributions (initially 2%) shared by employer

and employeeand employeeand employee. and employee. –– StartStart--up loan, which would be paid back in the up loan, which would be paid back in the

first yearsfirst yearsfirst yearsfirst years04/06/2010 Presentation Axel Weber at ADB 27

May 2010 11

ContCont Design FrameworkDesign FrameworkContCont. Design Framework. Design Framework•• Benefits:Benefits:•• Benefits:Benefits:

–– of 50% of Average Monthly Salary Credit of 50% of Average Monthly Salary Credit (AMSC=Assessment Base) of the last 12 months(AMSC=Assessment Base) of the last 12 months(AMSC=Assessment Base) of the last 12 months. (AMSC=Assessment Base) of the last 12 months.

–– Ceiling of 15,000 pesos (=average HH income)Ceiling of 15,000 pesos (=average HH income)–– waiting period of 7 dayswaiting period of 7 days–– waiting period of 7 dayswaiting period of 7 days–– Duration of the payment one month per year of Duration of the payment one month per year of

contribution payment to a maximum of 10contribution payment to a maximum of 10contribution payment to a maximum of 10 contribution payment to a maximum of 10 months. months.

–– In the case of repeated unemployment, the In the case of repeated unemployment, the p p y ,p p y ,benefit would be granted until the maximum benefit would be granted until the maximum period period



•• Qualifying criteria: Qualifying criteria: b i i t d ith PESO ffib i i t d ith PESO ffi–– being registered with a PESO office being registered with a PESO office

–– having paid the contributions. having paid the contributions. –– In the case of evasion (meaning if the In the case of evasion (meaning if the

employer has failed to pay the employer has failed to pay the p y p yp y p ycontributions) the unemployed person, contributions) the unemployed person, nevertheless, would receive the benefit nevertheless, would receive the benefit ,,and the UI would recover the costs and the UI would recover the costs including a fine from the employer. including a fine from the employer. g p yg p y



•• Administration: Administration: PESO ffi ( i t ti t i i d j bPESO ffi ( i t ti t i i d j b–– PESO offices (registration, training and job PESO offices (registration, training and job referral), referral),

–– TESDA (training) TESDA (training) –– SSS/GSIS (contribution collection and SSS/GSIS (contribution collection and / (/ (

benefit payment). benefit payment). –– Completely separate fund, governed byCompletely separate fund, governed byCompletely separate fund, governed by Completely separate fund, governed by

employers and employees employers and employees



Employers Employees Government SSS

GSISUnemployment Insurance

TESDA

Insurance

PESO

EmployeesEmployers


ContCont Design FrameworkDesign FrameworkContCont. Design Framework. Design Framework•• LaborLabor andand SocSoc Sec LawSec Law•• Labor Labor andand SocSoc. Sec. Law. Sec. Law

–– ToTo amendamend thethe Labor Code Labor Code –– toto makemake ititeasiereasier toto retrenchretrench withwith priorprior noticenoticeeasiereasier toto retrenchretrench withwith priorprior noticenotice

–– NoNo distinctiondistinction betweenbetween contractscontracts of 6 of 6 hh dd bb llmonthsmonths andand aboveabove concerningconcerning socialsocial

securitysecurity andand otherother protectionprotection–– NoNo severanceseverance paypay, , insteadinstead UIUI–– ToTo tightentighten sanctionssanctions inin casecase of nonof non--ToTo tightentighten sanctionssanctions in in casecase of nonof non

compliancecompliance withwith socialsocial securitysecurity lawlaw


ContCont Design FrameworkDesign FrameworkContCont. Design Framework. Design Framework•• Advantages:Advantages:•• Advantages:Advantages:

–– Employers less costs and obligations to Employers less costs and obligations to f if h f li lf if h f li lfear if they formalize employmentfear if they formalize employment

–– Pooling of severance payPooling of severance pay–– Employers more penalties to fear if they do Employers more penalties to fear if they do

not legalize employmentnot legalize employmentg p yg p y–– To abolish distortions in competition To abolish distortions in competition

among employers because no costamong employers because no costamong employers, because no cost among employers, because no cost advantage for those that do not legalize advantage for those that do not legalize employeesemployeesemployeesemployees


Quantitative Quantitative SimulationsSimulations::QQParametersParameters


Quantitative Scenario:Quantitative Scenario:QQdifferent different taketake--upup ratesrates, 50%, 50%


Quantitative Scenarios:Quantitative Scenarios:QQdifferent different taketake--upup ratesrates, 60%, 60%

Contribution Rates

5,00 6,00 7,00 8,00 50% 1 20% 1 44% 1 68% 1 92%

Contribution RatesAverage Duration of Benefit (Months)

e 50% 1,20% 1,44% 1,68% 1,92%60% 1,44% 1,73% 2,01% 2,30%70% 1,68% 2,01% 2,35% 2,68%80% 1 92% 2 30% 2 68% 3 07%ke

‐Up Rate

80% 1,92% 2,30% 2,68% 3,07%90% 2,16% 2,59% 3,02% 3,45%100% 2,40% 2,88% 3,35% 3,83%

Tak


Quantitative Scenario:Quantitative Scenario:QQdifferent different evasionevasion ratesrates

Contribution Rates

5,00 6,00 7,00 8,00 10% 1,80% 2,16% 2,52% 2,88%

Average Duration of Benefit (Months)Contribution Rates

, , , ,15% 1,90% 2,28% 2,66% 3,04%20% 2,02% 2,43% 2,83% 3,23%25% 2,16% 2,59% 3,02% 3,45%%

Evasion

30% 2,31% 2,77% 3,23% 3,70%35% 2,49% 2,99% 3,48% 3,98%


Quantitative Scenarios:Quantitative Scenarios:QQDifferent Different unemploymentunemployment


Quantitative Scenarios:Quantitative Scenarios:QQReserve FundReserve Fund

12

6

8

10

Contributions

Benefits

2

4

Benefits

Tranfers to Reserve

0

Year 1 Year 2 Year 3 Year 4 Year 5


Quantitative Scenario:Quantitative Scenario:QQCostsCosts forfor employersemployers

•• The impact on labor costs modestThe impact on labor costs modest•• SSS currently is 7.07% for the employer and 3.33% for the SSS currently is 7.07% for the employer and 3.33% for the

employee. employee. •• PhilHealth is 2.5% for the employer and 1.25% for the PhilHealth is 2.5% for the employer and 1.25% for the

employeeemployeeemployee. employee. •• 1313thth salary salary •• employers and employees contribute 100 pesos monthly to the employers and employees contribute 100 pesos monthly to the

loan program of loan program of PagPag IbigIbig. . •• Total social security costs are at around 10% for the employer Total social security costs are at around 10% for the employer

plus about 8% for the 13plus about 8% for the 13thth salary, which adds up to 18%.salary, which adds up to 18%.plus about 8% for the 13plus about 8% for the 13 salary, which adds up to 18%. salary, which adds up to 18%. •• Compared to this the additional premium of 1% is very modest.Compared to this the additional premium of 1% is very modest.


Quantitative Scenarios:Quantitative Scenarios:QQReplacementReplacement RateRate

•• RR is 50% up to ceiling of 15.000RR is 50% up to ceiling of 15.000AMSC d 10 000AMSC d 10 000•• AMSC around 10,000 pesosAMSC around 10,000 pesos

•• The minimum wageThe minimum wageThe minimum wage The minimum wage –– Currently between 210 and 382 pesos day, Currently between 210 and 382 pesos day,

monthl age of 4 200 and 7 600 pesosmonthl age of 4 200 and 7 600 pesos–– monthly wage of 4,200 and 7,600 pesos.monthly wage of 4,200 and 7,600 pesos.–– But many employers do not comply But many employers do not comply

•• Average monthly wage 12,525 pesos.Average monthly wage 12,525 pesos.


DiscussionsDiscussions andand ReactionsReactionsDiscussionsDiscussions andand ReactionsReactions

•• ParliamentParliament–– Flat rate versus Flat rate versus contributionscontributions

•• Trade UnionsTrade Unions–– NoNo flexicurityflexicurity

E lE l•• EmployersEmployers–– NoNo contributionscontributions unlessunless moremore flexibilityflexibility

•• GovernmentGovernmentGovernmentGovernment–– NoNo publicpublic servantsservants

•• OthersOthers–– NAPC Informal NAPC Informal sectorsector–– PASEI PASEI toto includeinclude OFWOFW


ConclusionConclusionConclusionConclusion•• General situation not satisfactory:General situation not satisfactory:General situation not satisfactory: General situation not satisfactory:

–– Low protection Low protection Rel ti el high nemplo mentRel ti el high nemplo ment–– Relatively high unemployment, Relatively high unemployment,

–– low compliance, unstable employment. low compliance, unstable employment.

•• More protection, more flexibility neededMore protection, more flexibility needed•• ProposalProposal subjectsubject toto debatedebate•• ProposalProposal subjectsubject toto debatedebate•• To break up deadlock and distrust To break up deadlock and distrust

between partnersbetween partners


Th kTh k YYThankThank YouYou

CopiesCopies of of thethe studystudy areare availableavailable::

http://www.dole.gov.ph/fndr/bong/files/Social%20Protection%20in%2http://www.dole.gov.ph/fndr/bong/files/Social%20Protection%20in%2http://www.dole.gov.ph/fndr/bong/files/Social%20Protection%20in%2http://www.dole.gov.ph/fndr/bong/files/Social%20Protection%20in%20Case%20of%20Unemployment%20in%20the%20Philippines.doc0Case%20of%20Unemployment%20in%20the%20Philippines.doc

mail@[email protected] 6531 973606449 6531 9736064+49 6531 9736064+49 6531 9736064


social protection in case ofsocial protection in case of ... › fileadmin › fb4 › prof › vwl...

Documents