Unemployment insurance in Jamaica
GROWING CONCERN with the level and duration of unemployment spells has led several governments to design programmes that provide economic support for the unemployed.
One such programme is unemployment insurance (UI), which is intended to mitigate the effects of unemployment during temporary job loss that was not due to the fault of the worker.
For Jamaica, implementing a UI programme should be a policy imperative given the unemployment rate, especially among women and youth. The ILO estimates that less than 40 per cent of those unemployed in the Latin America and Caribbean (LAC) receive unemployment benefits. Only 10 out of 33 countries in the LAC have UI programmes (eight countries in Latin America and two in the Caribbean).
Who will benefit from a UI programme in Jamaica?
UI would be beneficial to various categories of workers employed in the various industries. Workers may experience less job security in industries (e.g., agriculture, manufacturing and tourism) that are susceptible to natural disasters or heavily reliant on contract labour. The benefit would provide a temporary compensation to contributors within the aforementioned industries.
The programme would also benefit eligible women, especially those between the ages of 25-34 given the high unemployment rate among this group. More so, using the Jamaica Survey of Living Conditions (JSLC) as a reference point, it was observed that female-headed households continue to face a heavier burden of dependents compared to those headed by males. UI would also mitigate the financial challenges experienced by these women.
RECOMMENDATIONS FOR IMPLEMENTATION
Phased-in approach:
Based on Planning Institute of Jamaica estimates, a major challenge highlighted is the billions estimated for the implementation of the UI programme in Jamaica. Providing coverage for all eligible workers may prove very costly for Government and employers.
In Chile, a phased-in approach is used to reduce this cost whereby enrolment is optional for all workers who may qualify. The approach allowed employers and Government to gradually absorb the cost of implementing the programme and also allowed workers to familiarise themselves with the programme.
COMMON FUND:
The establishment of a Common Fund would reduce government and privatesector/employer spending while pooling risks between both parties. The government contribution is compulsory and is predetermined by law. The individual savings account consists of fixed contributions from workers’ (temporary and permanent) that can be withdrawn in full at the end of the employment relationship, irrespective of the situation or reason for dismissal.
Administrative Cost and Monitoring:
To minimise the operational cost and misappropriation of funds collected from the programme, the Jamaican Government may opt to adopt the Chilean approach. In Chile, an autonomous institution was created and legally separated from the State. This institution is responsible for collecting resources, administration, and paying benefits. The right to provide these services is auctioned to a sole provider. Through an auction process, bidders compete by offering low administrative fees, allowing employers’ contributions to be lower. Increasing NIS Threshold: Another suggestion is to increase the National Insurance Scheme (NIS) threshold by five per cent instead of incurring additional costs (billions) for establishing a separate programme. This additional amount could be used to cover persons that would be eligible for unemployment insurance.
See full study: ‘Unemployment Insurance for Jamaica: Forecasting Implementation Gains and Challenges’.