Editorial | First step towards rescuing NIS

The Government may have taken its sweet time. We nonetheless welcome its initiative to shore up the National Insurance Scheme (NIS), for which we have campaigned for three years since it became apparent that the scheme was in serious trouble and in danger of going bust.

A week ago, the finance minister, Dr Nigel Clarke, informed Parliament of his plan to increase the worker-employer contribution rate to the fund by one percentage point, to six per cent of insurable income, over the next two fiscal years.

At the same time, the ceiling to which contributions apply will be increased by 233 per cent, in two tranches, reaching J$5 million in 2022. The first tranche, in 2021, will move the ceiling from J$1.5 million to J$3 million.

These increases are being phased in, Dr Clarke wrote in this newspaper on Sunday, to allow employees and employers time to adjust for the impact of the changes. On that issue, the Government has wasted valuable time, largely because politicians are given to serving people palliatives, rather than offering them the truth and building real partnerships towards sometimes painful cures.

'Nothing to Worry About'

For instance, in early 2016, in marking the NIS' 50th anniversary, Shahine Robinson, the labour and social security minister, gave contributors the glib and unfounded assurance that they had "nothing to worry about". "The NIS is strong and vibrant," she said.

If that remark was because of Ms Robinson's ignorance of the facts, that would have been tantamount to gross dereliction of ministerial responsibilities, for everyone knew that since 2007, the NIS was paying out more in benefits than it received in contributions. The difference, which by 2013 was 30 per cent, was being covered by its return on investments. Further, as the scheme's 2013 actuarial report revealed, at the rate at which things were going, the NIS, by 2025, would have negative cash flow and would be completely broke by 2033. On a 50-year horizon, the scheme would have a deficit of J$384 billion.

All this was not because the NIS was overly generous or extravagant in the benefits to contributors. After all, it, on average, provides replacement income of only 11 per cent, although that calculation may not take into consideration that a portion of its contributions help to finance drug subsidies offered by the National Health Fund.

High Inflation

Significantly, too, high inflation, over decades, has eroded the value of the scheme's benefits, while the greying of Jamaica's population helped to pump up the number of beneficiaries, although not bringing on new contributors at a fast rate. These issues have been exacerbated by anaemic economic growth and high unemployment, which constrict inflows to the fund.

We had advocated for an offsetting rise in the cap of insurable income and the rate of contributions. These increases might be offset, in part, by, say, a lowering in contributions to the National Housing Trust, which, in some respects, is overfunded, and many of whose contributors can't access its loans.

But these changes were to have been after a robust period of consultation on the merit of the ideas, leading to a broad consensus. We do not believe that it is too late to implement elements of this strategy, which should include a robust campaign to encourage self-employed persons, and those in informal business - for example, hairdressers, barbers, bartenders and auto mechanics - to contribute to the scheme.

Dr Clarke has suggested that the NIS is now marginally better off than it was in 2016, with a negative cash flow projected in 2029 and the scheme going broke by 2037 - four years later than timelines projected in 2013. His initiatives will improve the situation but not completely take the NIS out of the woods. So, he has other strategies, too, including improving the investment management - and hopefully transparency - of NIS money. Those changes should include barring the Government from raiding the NIF for cash.