The government is keen on setting up a fund for jobless employees to help tide them over while they’re looking for another job, according to the National Economic and Development Authority (Neda).
Neda Undersecretary for Planning and Policy Rosemarie G. Edillon told reporters recently that the “unemployment insurance” could consist of contributions from employers and the government. Its creation, however, can remove the severance pay for workers. Edillon said this is acceptable to some employers’ groups.
“We’ve had some consultations before with some employers’ groups; they may be amenable to the removal of the severance pay. The problem with severance pay is when, finally, businesses have to close down, or retrench workers, they still need to spend for severance pay which increases their losses,” Edillon said. “With the unemployment insurance, from day one, employers are already building up the fund. So during an economic downturn, that fund can be tapped,” she added.
Edillon said the Philippines can take a cue from Vietnam, which has an existing unemployment insurance consisting of contributions from the government and employers.
Vietnam’s jobless fund, she said, complemented efforts of its own versions of the Social Security System, the Public Employment Service Office and the Technical Education and Skills Development Authority to assist unemployed Vietnamese workers.
Edillon said the creation of an “unemployment insurance fund”, based on Vietnam’s experience, allowed the country to significantly cut its jobless rate. She said Vietnam’s unemployment rate slowed to only 2 percent compared to the Philippines’s 5.5-percent unemployment rate for 2016. She said the unemployment insurance fund made hiring and firing easier because employers did not have to worry about severance pay and workers know they have a safety net they can access in case they lose their jobs.
“The ultimate objective is really to make, to free up your labor market from all these restrictions. We think the [unemployment insurance] actually provides a win-win [solution]. [It is] flexible for the employer and, at the same time, secure for the employee, in terms of their income,” Edillon said. “[What’s important is] not job security, its income security.” If this will be adopted in the Philippines, Edillon said a law needs to be crafted to create the fund which can be lodged with the SSS. This will also require amendments to the Labor Code.
Currently, the Neda is looking for sponsors to push this bill at the House of Representatives and the Senate.
Despite the slight uptick in the number of unemployed Filipinos in July, the national government remains confident it will still meet its target of creating 1.1 million jobs this year, according to the Neda.
At the sidelines of the budget hearing on Tuesday, Socioeconomic Planning Secretary Ernesto M. Pernia told reporters the new entrants in the labor force caused the uptick in unemployment rate. The number of jobless Filipinos in July rose to 2.37 million from 2.33 million a year ago. This translated to an unemployment rate of 5.6 percent in July, higher than the 5.4 percent recorded in the same period last year.