Editorial | Discuss unemployment insurance

NOW THAT Kavan Gayle, a government senator and head of the trade union aligned to the ruling party, has added his voice to the matter, the administration may be inclined towards a robust discussion of how Jamaica might implement an unemployment insurance (UI) scheme , and on amending the redundancy laws to ease the burden on firms when they are at their most vulnerable.

These matters have been periodically raised in these columns for more than a dozen years with little traction, but for Finance Minister Nigel Clarke’s suggestion a year and half ago that the possibility of a UI arrangement would be put to the Planning Institute of Jamaica (PIOJ) for study. Whether that has happened is not known. If it did and the PIOJ has or is conducting that analysis, the agency has been rather quiet about it. Perhaps that is a symptom of the COVID-19 pandemic, whose ravaging of global economies, including Jamaica’s, encouraged us to reprise this issue in mid-2020.

With the onset of COVID-19, Jamaica, like other countries, went into prolonged lockdowns to slow the spread of the virus. More than 130,000 people were thrown out of work – either being made redundant or placed on extended furloughs. The island’s unemployment rate, having dipped to 7.2 per cent by October 2019, spiralled to 12.6 per cent eight months later. The Government allocated several billion dollars in short-term employment support to the most vulnerable sectors and laid-off employees.

ISSUES HIGHLIGHTED

The crisis highlighted not only the weaknesses in the island’s social safety net, but the existential threats many firms face during difficult periods – as The Gleaner pointed out in these columns in 2009, while calling for mechanisms to obviate the worst of these dangers for companies and their employees.

Indeed, firms are especially vulnerable during serious economic downturns, or when they face unexpected shocks. They sometimes have to restructure themselves to survive. This may require shedding jobs.

But under Jamaica’s laws, if a firm makes employees redundant it has to pay compensation of two weeks’ salary per year, up to 10 years of employment, and three weeks per year thereafter. That can be an unbearable burden during hard times. Workers may also be laid off, without pay, for up to four months, after which they have to be brought back to work or made redundant. So, workers, too, face hardships.

There was another potential downside to the redundancy payment requirements, as the late income tax accountant, Ethlyn Norton-Coke, observed as far back as 2011. It can be a deterrent to hiring. “Many persons don’t employ people any more because they have redundancy payments,” she said.

The question, in these circumstances, is how to balance the interests of workers while creating an environment that gives firms the best possibility in these difficult times. Like this newspaper, Mr Gayle, the president-general of the Bustamante Industrial Trade Union – although he appeared to limit his perspectives to cushioning short-term shocks faced by employees – concluded that some kind of unemployment insurance would be appropriate.

AUTOMATIC STABILISER

“We need a system that acts as an automatic stabiliser by supporting spending power during periods of personal challenge or national economic downturn,” he said in the Senate last week. “Such a scheme would guarantee an appropriate level of income during the period of unemployment.”

This newspaper, in its earliest discussion of the matter, raised the possibility of an “employee-contributed unemployment insurance scheme, operated by the National Insurance Fund”. Employers, too, would contribute to the fund. We also said in 2009: “Staff who never call on the fund could perhaps redeem a portion of their contribution in additional retirement benefits.”

Indeed, as old civil service hands reminded when The Gleaner urged in June 2020 that the UI scheme be placed in the national agenda, the matter was actually part of the preparatory work for the establishment of the National Insurance Scheme (NIS) and was an issue in the November 1965 parliamentary debate on the NIS law. The unemployment insurance bit was, however, deferred as being too costly, although one suggestion was that unemployment payouts would happen two decades after the scheme’s launch.

We are sure that there are many practical obstacles to establishing a UI scheme. The potential models are also numerous. But these difficulties should go beyond the creative imagination and technical competence of Jamaicans to get a scheme done, although all its components may not be operational immediately.

In that regard, Minister Clarke and/or the head of the Planning Institute of Jamaica, Dr Wayne Henry, should advise whether the study Dr Clarke spoke about was actually commissioned, and the status of that report. Or, it might just have been a matter of Dr Henry causing already-existing studies on the matter to be updated. Let us know either way.