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Unemployment insurance in PH: Long overdue

Looking at the glass half-full rather than half-empty, the pandemic is a long-needed wake-up call for the Philippine economy. If not for the pandemic, I wouldn’t be writing this article today, contemplating how workers are coping with the tremendous economic shocks they’ve collectively faced in the last 14 months.

We hit rock bottom with an unemployment rate of 17.7 percent in April 2020, the highest ever recorded since we first conducted the Labor Force Survey in 1956. Though unemployment eased to 8.8 percent by February 2021, other statistics suggest that the Filipino worker faces uncertainties. The underemployment rate increased from 16 percent in January 2020 to 18.2 percent in February 2021. In the same period, total unpaid workers increased from 2.6 million to 3 million, and total self-employed individuals with no workers rose from 11 million to 12.5 million.

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The thought of losing one’s job Philippine-style can be nerve-wracking given the lack of social protection programs for workers. On the average, the Filipino household spends about P20,000 per month, with two members having earnings. With a general economic downturn, a household might experience both members losing their jobs, and the entire household can literally go hungry. There are scant savings to draw from; the majority of those earning P30,000 and below allocate less than 10 percent of income to savings. Further, by late 2020, only 26 percent of all households could set aside savings at all, compared to 45 percent a year prior.

Seventy-one percent of Filipinos continue to be unbanked, hence, few have access to loans. Transfers (e.g., ayuda) received by households average about P1,000 a month, enough to cover just half a month’s worth of rice consumption. While the SSS and GSIS provide some form of unemployment assistance, these only amount to about 50 percent of income; for the SSS, this is capped at P10,000 a month for two months. Clearly, the Filipino workers who lose their jobs fall through the cracks, with almost no safety nets to catch them.

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Unlike other Asean countries, we do not have a proper unemployment insurance program which provides assistance to workers who have lost their jobs through no fault of their own (e.g., a novel virus causing massive disruption on business operations). This assistance serves two important economic functions. First, it ensures “consumption smoothing,” a technical term meaning “business as usual.” Even with a sudden loss of earnings, families are assured that they can spend about the same as prior to the job loss. In short, they need not “fall off the edge of a cliff” during unemployment. Second, this assistance supports job search costs. Looking for a job requires having internet access, printing documents and photos, and spending on transportation and perhaps clothes for an interview. Occasionally, looking for a job requires enrolling in training programs, especially when firms have pivoted to new ways of doing business, like what COVID-19 has done today.

In June 2020, I filed House Bill No. 7028, seeking to establish a National Unemployment Insurance Program. Premium contributions are based on earnings, and so are insurance payouts. It is designed such that a worker who loses his or her job involuntarily can receive 80 percent of previous monthly pay for up to three months. With this amount, the worker does not substantially cut back on usual consumption spending and can shoulder out-of-pocket expenses associated with job search. The program also provides for training needed to increase one’s employability.

An important feature of the program is that the premium contribution will be shared equally by the employer, employee, and government. This is based on the principle that government has a stake: If it wants to reduce premium contributions, it must ensure that labor policies are such that the risk of job loss is minimized. I’ve also proposed that the program be administered by a new corporation called PhilJobs, a lean and mean professionally run organization that will be unlike

GOCCs that we have become allergic to.

On this Labor Day, on the year that we will begin to see the end of the pandemic, I pray that my colleagues in Congress and our economic managers see the wisdom of meaningful social protection for El Obrero.

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Rep. Stella Quimbo, PhD, is a former professor at the UP School of Economics, former commissioner of the Philippine Competition Commission, and currently the representative of the second district of Marikina City.

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Business Matters is a project of the Makati Business Club ([email protected]).

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TAGS: economy, insurance, Stella A. Quimbo, Unemployment
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