According to a report by the International Labour Organization (ILO), existing laws regarding income security in Asia only guarantee sickness benefits to a third of the working-age population. At the same time, less than one-fifth of workers who have been displaced receive unemployment benefits.
Moreover, not all governments have developed social insurance schemes as automatic stabilizers, including unemployment insurance systems that can effectively respond to market downturns, general declines in economic activity and subsequent rises in joblessness. For instance, in the Philippines, unemployment assistance is primarily accessible only to individuals who are employed in the formal sector and covered by the social security system. Most Asian nations, particularly developing ones in Southeast Asia, have yet to establish robust social insurance systems for their citizens, resulting in persistent domestic inequality.
Such limited unemployment insurance coverage is a significant issue in the region. Unemployment insurance plays a crucial role in providing financial support to individuals who have lost their jobs and are actively seeking employment. It serves as a temporary income replacement during the transitional period between jobs, helping workers meet their basic needs and maintain their purchasing power. However, the limited availability of unemployment benefits in Asia hinders the ability of workers to cope with job loss, pushing them further into poverty and exacerbating inequality.
To address these challenges, Asian governments should prioritize developing and enhancing unemployment insurance systems. By expanding the coverage and eligibility criteria for unemployment benefits, governments can ensure that a broader range of workers are protected. This includes extending coverage to informal workers and self-employed individuals, who often face precarious employment conditions and are more vulnerable to economic shocks. Implementing comprehensive unemployment insurance programs will provide a safety net for workers and contribute to greater economic stability and resilience in times of crisis.
Additionally, governments must establish effective mechanisms for funding unemployment insurance programs. Sufficient funding can be achieved through a combination of employer and employee contributions, government allocations, and exploring potential innovative financing models. Furthermore, ensuring the efficient administration and timely disbursement of benefits is vital to guarantee that unemployed individuals receive the support they need in times of crisis.
There is a need to assess the effectiveness of unemployment insurance schemes by examining their design and institutional characteristics. Alternative approaches beyond traditional systems should be explored. For instance, the ILO/UNIQLO project in Indonesia is a collaborative effort between the ILO and Fast Retailing, Co. Ltd. (the holding company of UNIQLO) that aims to enhance support mechanisms for unemployed individuals. This unique partnership spawned from the legal battles between the partner company in Indonesia and laid-off employees. When UNIQLO embraced the opportunity to engage with the ILO, the project focused on designing a robust employment insurance system, expanding re-skilling programs, and improving public employment services.
Before this project, existing mechanisms for protecting unemployed workers in Indonesia were insufficient. Without employment insurance, individuals rely on statutory severance pay and savings withdrawal as a substitute for income during unemployment. However, these schemes do not guarantee adequate benefits, especially in cases of employer insolvency, reducing their reliability for unemployed workers.
This UNIQLO/ILO project reveals the importance of connecting the collection and distribution of unemployment benefits and the role of active labor market policies. Public employment services and re-training programs are crucial for facilitating reemployment and transitioning workers from declining to emerging sectors. Moreover, policymakers must consider the critical role of enabling dialogues to assist the stakeholders, especially union workers, and guide them in understanding the project’s significance.
The successful implementation of the ILO/UNIQLO project in Indonesia can serve as a model for developing countries in the region, particularly involving stakeholders in the discussion when developing employment insurance programs. By focusing on effective employment insurance and promoting skill development and reemployment, the project contributes to establishing comprehensive social protection mechanisms.
The recent crises have highlighted the urgent need for Asia to build more inclusive and responsive social protection systems. Unemployment insurance is a critical component of these systems, yet its coverage remains limited in many countries. By expanding the scope of unemployment benefits, ensuring sustainable funding, and further enabling more comprehensive programs, governments can better safeguard their populations against future economic shocks and promote greater equality.
This student blogpost is a deliverable in the context of the International Field Workshop in August 2023 and represents the author’s personal views on the subject. The author benefited from a rich and insightful discussion with Mr. Ippei Tsuruga, Social Protection Programme Manager of the International Labour Organization, at the virtual meeting on August 14, 2023. The author sincerely thanks Mr. Tsuruga for dedicating his time to the precious insights gained through his work and research.
