ILO Standards for Employment Promotion and Protection against Unemployment Celine Peyron Bista Chief Technical Advisor, UI ASEAN Project ILO Regional Office for Asia and the Pacific, Bangkok Ho Chi Minh City, 21 March 2012

Structure of the presentation  ILO Standards for unemployment protection Objectives and Principles ILO Convention No.168 for benchmarks  Conceptual considerations on UI and EI  Comparative analysis of UI/EI schemes  Conclusions: in the ASEAN?

Protection against Unemployment in ILO Standards (up-to-date) Employment Promotion and Protection against Unemployment Recommendation, R. 176 Convention concerning Employment Promotion and Protection against Unemployment, C. 168 Convention concerning Minimum Standards of Social Security, C. 102 (Part IV – Unemployment Benefit)

Maintaining the unemployed and their family in healthy and reasonable living conditions (C168, art.16) Objective: To protect workers and their family against loss of employment and income Promoting active labour market policies for full, productive and fully chosen employment (C168, art.2&7) UI benefits ALMP 1. providing income security 2. upgrading skills and matching labour supply/demand

Major Ideas around which the Convention No. 168 was built (1988)  Economic growth :  best cure against unemployment with a flexible response to change;  lead to creation and promotion of all forms of productive and freely chosen employment (Art. 2 C. 168) including small undertakings, cooperatives, self-employment and local initiatives for employment (e.g. paras. 7-8 R. 176);  Social security = a means to promote employment and increase capability & employability (larger concept of social protection= SPF)  Need for Active coordination, integration and consolidation of the different means (employment assistance and economic support) serving the goal of employment promotion  By establishing a national “system of protection against unemployment”.

Particularity of Convention No. 168  looks beyond the internal organization and functioning of the traditional social security system (Conv. No.102) into the external socio-economic environment where social security interacts with the labour market, human resources development and the economy at large; Employment policy Human resources development Social security

Capable of working, available for work and seeking work Social dialogue Periodical payment, limited in time Equality of treatment Cash benefits and employment support services Social insurance Contingency covered & Principles

Coverage: 1. all employees, including public employees, apprentices (art.11), part-time (art.10), seasonal workers (art.17) 2. New entrants (art.26) 3. Excluded: Misconduct, voluntary leaving without good reason (art.20) 4. Special provisions for seasonal workers-qualifying and waiting periods, benefits duration (art.17, 19) 5. Suspension/exclusion: fail to use employment and VT services, refuse suitable employment (art.20) Benchmarks recommended by ILO C.168 & R.176

Benefits : 1. Income replacement (not less than 50% of the reference wage= previous earning, minimum wage, or minimum guarantee for living (art.15)) 2. Allowances: vocational training and retraining, travel costs to claim benefits (R176, GP.4.) 3. Services: job placement and counseling (art.8) 4. Benefits for part-time workers seeking for full-time job (art.10) 5. Benefits/ severance pay complementary but no overlapping (art. 22) 6. Acquisition of rights to medical care & sickness, pension, maternity and family allowances (art.24) Benchmarks recommended by ILO C.168 & R.176

Structure of the presentation  ILO Standards for unemployment protection Objectives and Principles ILO Convention No.168 for benchmarks  Conceptual considerations on UI and EI  Comparative analysis of UI/EI schemes  Conclusions: in the ASEAN?

11 The ILO’s Perspective The Provision of Unemployment Benefits on the basis of – Periodical payments, and – Social Insurance is optimal in most cases, for reasons including: – It is well-suited to ensuring the rights of participants; – Periodical payments best meet the livelihood needs of individuals and families (limitations of the severance pay); – The social insurance mechanism allows for “pooling” of risks and costs on an equitable basis; and – Allows for protection of workers even when an employer becomes insolvent or individual savings mechanisms fail (as in recent economic crisis).

12 Limitations of the Social Insurance, informal economy Insurance schemes often fail to work well for workers in the informal economy : – even though contributions can be proportional for those with low incomes, – it may be difficult to ascribe adequate benefits for those who can only contribute on an irregular basis. It has been suggested that where informality predominates in national labour markets, unemployment protection should be provided through individual savings accounts. The ILO does not agree with this view, as the evidence to date shows that Unemployment Savings Accounts generally fall far short of providing adequate benefits, especially for workers with low earnings. A better approach is probably to strengthen social assistance provisions and develop programs to increase capability & employability of workers.

13 UI, EI is there any difference? National schemes may have the title: – “Employment Insurance Scheme” (e.g. Korea, Japan, Canada, proposal for Sri Lanka and Viet Nam) or – “Unemployment Insurance Scheme” (e.g. Thailand, France) In most cases, the title may not affect the scheme substantively, BUT It can be useful for the title to convey the national policy approach to the subject

A typology of Passive and Active Labour Market Policies Passive LMPActive LMP Provides temporary ‘income security’ for the unemployed:  contributory Unemployment Insurance Benefits  Severance/compensation payment (under Employers’ liability) Employment-related social assistance that steps in when the unemployed are no longer eligible for UI, or for new entrants (tax-funded) Unemployment Saving Accounts Provides active support to unemployed workers in making ‘transitions’ to new employment: Job search assistance Training or re-training to increase employability (apprenticeships). Promotion of SME through business management training, mentoring, access to credit access, tax incentives, etc. Wage subsidies to encourage hiring of unemployed or maintaining in employment. Employment guarantee schemes Employment through public investments No universal formula!

Emphasis on UI or EI Cash benefits + Job placement & counseling + skills development and VT + Employment guarantee schemes + Employment restructuration + Employment stabilization PLMP ALMP High Low High Low

Structure of the presentation  ILO Standards for unemployment protection Objectives and Principles ILO Convention No.168 for benchmarks  Conceptual considerations on UI and EI  Comparative analysis of UI/EI schemes  Conclusions: in the ASEAN?

Comparative analysis among 14 UI/EI schemes USA Canada Chile Argentina France Germany Bahrain Denmark Viet Nam Thailand China Japan South Korea Mongolia Population All 14 schemes are social insurance systems, for the exception of Chile (Individual Unemployment Saving Accounts- IUSA)

UI, often emerging after a shock Denmark (1907) Germany (1927) USA (1935) Canada (1940) Japan (1947) France (1958) China (1986) Argentina (1991) South Korea (1995) Mongolia (1997) Chile (2002) Thailand (2004) Bahrain (2006) Viet Nam (2009) 1900 Global economic crisis Asian financial Crisis Great Depression 30s’ Opening Reform of the communist block Second World War First World War Free market reforms in several countries

Unemployment situation in 14 countries * For Canada, Japan, South Korea and USA figures are from 01/2012; for Mongolia, Source: Harmonised Unemployment Rates (HURs), OECD - Updated: February 2012 for OECD countries, CIA-the World Fact Book for other countries.

Coverage Employe es Public employees/ civil servants Foreign workers Voluntary termination Domestic workers Currently working Part-time Temporary /seasonal/ home- based workers Self- employed New entran ts Argentina Bahrain Canada Chile (IUSA* only) China Denmark (vol.) (vol., wait. per.) (vol.) France (vol.) (EU) (wait. per.) Germany (EU) (wait. per.) (vol.) (vol.) Japan (wait. per.) Mongolia (reduced)n/a South Korea (reduced) Thailand (reduced) USA (not federal) n/a Viet Nam (pub. empl.)

Legal vs. Effective Coverage Source for data prior to 2010: ILO World Social Security Report 2010/11 Effective coverage: percentage of unemployed receiving unemployment benefits Legal coverage: percentage of EAP legally covered by UI scheme Source: ILO comparative analysis of 14 UI/EI schemes, 2012 (draft report- not for quotation)

Contribution rates EmployeeEmployerGov.Remarks Argentina0.89 to 1.11 Bahrain111 Canada Chile % of Employers’ contributions Temporary employee: 3% from employer China12Ad-hoc contribution DenmarkFlat fee70% of expenditures Typical fee between 70 to 80 USD France2.44 Germany1.50 Japan % of payment Only employers contribute to Two Services Mongolia0.5 South Korea ( 1000) Employers’ contribution only to Employment Security and VT Fund Thailand USA3.2Varies from 1.4% to 6.7% across States Viet Nam111 Total contribution rate Source: ILO comparative analysis of 14 UI/EI schemes, 2012 (draft report- not for quotation)

Eligibility criteria and Benefits Qualifying periodLevel of benefits Duration of benefits Argentina12 months in last 36 months50% for 1st 4 months, lower afterwards4 to 12 months (18 for > 60) Bahrain12 months or 1 st time jobseekers60% and flat amount for 1st-time jobseekers6 months Canada3 to 4 months50%3.5 to 11 months ChileISA: 6 or 12 months depending if temporary or permanent SI: 12 months in last 24 months (3 cont.) IUSA & SI: Decreasing monthly rate (50 to 20%) for permanent workers, SI: 35 to 30% for temporary workers 5 months (2 for temporary) China12 monthsFlat rate (< mini. wage)12 to 24 months Denmark12 months in last 36 months90%24 months France4 in last 28 months if younger than 50, or 4 in last 36 months if older 75% at low income, grading down to 57% at high income 4 to 24 months Germany12 months in the last 36 months60% (higher if with children)6 to 24 months (age) Japan6 months in the last 24 months50 to 80% (digressive with level of past earnings). 3 to 11 months (reason) Mongolia24 months (last 9 continuous) (adjusted to 6 during 2009) 15 to 17% depending on contribution length18 months (increased to 24 months during 2009) South Korea6 months in last 15 months50%3 to 8 months Thailand6 months in last 18 months50% (30% for voluntary quitters)6 months (8 during 2009) USA12 months in last 15 months50%6 months Viet Nam12 months in last 24 months60%3 to 12 months Source: ILO comparative analysis of 14 UI/EI schemes, 2012 (draft report- not for quotation)

Comparison between unemployment rate and cost (contribution rate & % of GDP) (2010) If includes expenditures for ALMP Source: ILO comparative analysis of 14 UI/EI schemes, 2012 (draft report- not for quotation)

Active labour market policies All schemes: - are equipped with employment service centers which offer job counseling and placement services, - provide VT and skills development grants. Integrated ES under the UI/EI fund: - Japan: Two Services, - South Korea: Vocational Competency Development & Employment Stabilization, - Canada: Employment Benefits and Support Measures. Support to skills development beyond the UB entitlement limit: Mongolia, France, Japan. Work-sharing subsidized by UI/EI Fund: Canada, Denmark, France, Germany. Labour mobility assistance (equipment allowance, travel allowance, household allowance and relocation allowance): Germany. Re-employment lump-sum: Japan, South Korea, Viet Nam. Employment stabilization (loans to enterprises to maintain wages and employment): Japan, South Korea. Preventive case management prior to lay-off: USA.

Lessons-learnt from the 14 UI/EI schemes It does not exist a “one-fit-all” model. Should be included: temporary/seasonal workers, domestic workers, foreign workers, new entrants (young, women and informal eco. workers), “forced” part-time employed, home workers, SME, self-employed. Certain flexibility to adjust parameters during crisis Denied or reduced benefits for voluntary quitters (insurance) Case management services (closer support to unemployed)

Structure of the presentation  ILO Standards for unemployment protection Objectives and Principles ILO Convention No.168 for benchmarks  Conceptual considerations on UI and EI  Comparative analysis of UI/EI schemes  Conclusions: in the ASEAN?

Relevance for the ASEAN Informal employment increased in South East Asia as a consequence of laid offs in formal sector Example of Indonesia After the crisis, job creation was mainly in vulnerable employment Unemployment benefits & other income security measures facilitate recovery Uncertainty persists due to Eurozone debt crisis and low US recovery….

Existing measures in the ASEAN Only Thailand and Viet Nam have introduced UI schemes Limitations of the severance pay systems Fragmented or no measures to protect the informal economy workers Majority of the working population in informal economy How the others do it? How can we do it better?

Thank you!