Jamaica needs an Unemployment Insurance Scheme

Jamaica needs an Unemployment Insurance Scheme

Dem seh cow neva know di use of him tail til him lose it

Duane C E

Sunday, July 12, 2020

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The global pandemic has revealed the lack of several key social infrastructures in our society and chief among them is the need for Jamaica to have unemployment insurance.

Unemployment insurance is a system that obtains in other countries around the world; both emerging and developed; whereby a safety net is created for people who, for one reason or another, become unemployed. The COVID-19 pandemic has shown us that there is a need for such an insurance plan.

In Jamaica, for example, hundreds of people have been misplaced from jobs for a long time. Tourism workers, in particular, strike me as a major market of people who have lost jobs; and currently have little or no income whatsoever. Luckily, the political administration developed a care package programme and just from looking at how oversubscribed it was, has shown the genuine reality that people need the money.

The tourism industry is not as sustainable as the stakeholders think and the people at the base of the food chain are offered the least protection. When our economy depends heavily on tourism the way it does; we must create the necessary framework to protect the tourist workers from possible reoccurrences like this.

If we had an unemployment insurance scheme, there would be limited need for the care programme, except for the vulnerable – people like the retired, home-based individuals who can do very little to go out there and earn for themselves.

People who are now unemployed would be able to tap into that insurance, provided they have been contributing and meet the prescribed criteria. Now, we have to decide how it would be financed. Other countries finance it collaboratively through Government and through employers — something I believe we could also do, right here in Jamaica.

The truth is a lot of people in Jamaica live pay cheque to pay cheque, so unemployment insurance is something I believe any future administration in this country needs to take a good look at, especially with an election constitutionally due in seven months, touted to be sooner … this is something that the Jamaica Labour Party needs to place in its manifesto.

The care programme touched people who were in business now unemployed, regular unemployed people, and it showed just how the financial thing was awry, where we have had to have a supplementary budget, where the Government had to do some tweaking of other expenses all over the place; when tapping into an unemployment insurance would have come directly to the rescue and eliminate some of those pressures on the State, and on the individual.

It is something that we need to tap into with urgency, we must sit down now as a country and plan the best way of financing it. It has worked in other countries of the world, so there is no reason why it cannot work in Jamaica.

In my research, I haven't seen where it has been a private entity that has taken on such a venture. It is more State-operated, like 'Pay-As-You-Earn' (PAYE) that comes out of your salary, a similar approach could be taken whereby a contribution would come out of your salary every month and go towards a fund in the event that you ever become unemployed. This would be for both public and private sector workers.

Only last week, the National Commercial Bank (NCB) made the positions of 121 workers redundant, and although they are going to be getting redundancy money, they are now unemployed. If needs be, they should be able to tap into something until they find employment. Based on how NCB is shaping up, I suspect that more redundancies are coming, as they have said they are going cashless, so there will be less of a need for tellers and functionaries in the bank.

Maybe the unemployment fund will even grow so much, based on how the economy functions, that at one stage there could be surplus funds that can be used for other creative things, but that's a decision that the administrators of the fund can make.

Essentially, however, it should be run along similar lines as the National Housing Trust, whose priority is to provide housing solutions to those in need.

This is something that should be implemented as a matter of priority, as soon as the new administration takes office. To me, the most difficult part is for the actuaries to sit down and determine how it is funded, as in some jurisdictions, it is fully Government-supported; in other administrations it is Government and employer acting as one.

So, I as a businessman would make a payment monthly to the Government on behalf of my employees, in the event that any employee is laid off, or fired. Of course, there would be stipulations in place to ensure individuals claiming the insurance have not lost their jobs based upon a just cause, like stealing, which would make them ineligible to claim benefits.

Should it be mandatory? Well, it doesn't have to be, because if someone works at a company and says, 'I don't want to be a part of this system, when I am out of a job, I would rather, borrow, thief, hustle or whatever'; that would be their choice. More oxtail for me. But for those who want the plan, and like the security of being financially free, we would like to know that if we get laid off tomorrow, there will be an income. If I get laid off because of COVID-19 or some natural disaster, I know that for at least six to eight weeks, I have something coming. The duration for which individuals can make claims under the scheme varies across territories based on the literature I have observed and we can find the best fit for our society based on the job market and economy— a sustainable fit.

Of course, there could be variations in terms of what is deducted, assuming that the employee agrees to being a worthy partner, for example, one per cent of salary, up to five per cent, just like the pension contributions work.

I came across an October 2019 study by the International Labour Organization (ILO) looking at unemployment insurance across the world in both emerging and advanced economies. The study revealed that “emerging” countries, a category that Jamaica would fall under, financed their unemployment insurance collectively; with contributions from government, employers and workers.

The ILO study also revealed that the schemes across the world are accessible to people within the formal sector as well as dependent employees. This is similar to the approach being taken by the Government and the Ministry of Finance with the CARE Programme.

An unemployment insurance is a buffer to protect the labour force (formal) against the risk of job loss. In most cases these interventions have duality in purpose as they generally tend to have some level of job-searching requirement attached. This means the insurance would differ from a Programme of Advancement Through Health and Education (PATH) grant or social intervention cash transfer, in that it tackles poverty caused by unemployment and incentivises job hunting simultaneously. The cow must help in the search for greener pastures.

Variations are seen across the globe in the level of stringency applied to those who would qualify but the common element is that individuals who do qualify generally fall within the formal sector. Other variances include the value and duration of the support given and the weight placed on actively job searching with some nations applying penalties for job refusal.

But COVID-19 has shown that Jamaica is now ready for an unemployment scheme, because a lot of people lost their jobs in the last four months and have nothing coming in, apart from remittances, which are down, because there are challenges too from the countries of origin; they depend on the Government's care packages, now some are even waiting on a second tranche of Government's care package programme, yet, if they had unemployment insurance, when they sleep they would snore.

Duane C E Smith, MBA, JP is a businessman and Councillor for the Chancery Hall Division in the Kingston & St Andrew Municipal Corporation.

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