Unemployment Insurance Feasible and Justifiable in Thailand, says ILO report

New ILO report discussed at Tripartite seminar says the expansion of Thailand's social security coverage make unemployment insurance more feasible and justifiable.

Press release | BANGKOK | 29 March 2002

BANGKOK (ILO News):- The significant expansion of Thailand's social security coverage due to take place in April will also make unemployment insurance more feasible, and justifiable, the ILO says in a new report to the country's government, employer and worker organizations.

The social security scheme's reach will almost double, to 10 million workers, following the government's decision to extend it to enterprises with one or more workers from April. The current cut-off is 10 or more. The ILO notes that this extension "increases the feasibility and justification for an unemployment insurance scheme" as small and large enterprise workers will all be coming within the scope of the same unemployment insurance system. This is in line with the requirements of the 1990 Social Security Act calling for the establishment of an unemployment insurance scheme.

The ILO study will be discussed at a tripartite meeting in Bangkok on Monday 1 April, to be opened by the Permanent Secretary of Labour and Social Welfare, Khun Elawat Chadraprasert, at the the Ministry of Labour and Social Welfare at 0900 a.m.

It examines a proposal formulated by the Sub-Committee of the Social Security Committee in September 2001 for an unemployment insurance scheme, and puts forward the ILO's position. Under the proposal, eligible unemployed workers would receive a benefit equivalent to half their average insurable earnings for a maximum of 180 days in the year after becoming unemployed. An autonomous unemployment insurance fund would pay for the income replacement benefits as well as providing employment services and job re-training from contributions levied on a set percentage of earnings which should be kept as low as possible according to the ILO. Small enterprise workers and their employers are concerned about the overall affordability of the social security system as a whole including unemployment insurance.

With further globalization of trade, governments face a more volatile economic environment. The report notes that unemployment insurance linked with measures for returning laid-off workers to jobs can play a key role in matching labour supply with demand and to alleviate the social consequences when an economic downturn occurs.

One of the major lessons of the Asian financial crisis, the report says, "was that social policies had received insufficient attention during the decades of prosperity." Before the crisis, it says, Thailand had not given priority to unemployment insurance assuming that these were "costly programmes with generally negative effects". It was only when the Asian financial crisis of 1997 caused unemployment amongst all types of employees in the private sector that most acknowledged the pressing need to set up the framework and infrastructure for a sustainable unemployment insurance measures.

In fact, the report notes, three of the countries worst affected by unemployment during the financial crisis, Thailand, Indonesia and the Republic of Korea could have introduced affordable schemes before it struck. "If Thailand, Indonesia and Korea had moved to introduce unemployment insurance six years before the crisis struck designed to pay qualified unemployed people 50 per cent of earnings for 12 months, the contribution rates would have been less than 0.5 per cent of wages in each country." Korea has undertaken since then the swiftest changes to assist the unemployed.

Based on that experience, the report says, Thailand should move ahead with unemployment insurance now, not later. "Waiting for a so-called ideal situation would be inadvisable," it says. Efforts must be invested in the challenging task of building Thailand’s administrative capacities and the synergies amongst existing institutions to run an unemployment insurance system as soon as possible. Social dialogue based on solid analysis is required so that a general public consensus is reached and the unemployment insurance scheme can take off.