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Jakarta Post

Building comprehensive protection against unemployment

  • Kazutoshi Chatani and Fasrul

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-   /   Fri, September 18, 2020   /   08:40 am
Building comprehensive protection against unemployment Workers stage a rally in front of the House of Representatives’ complex in Senayan, Jakarta, on Aug. 25. They opposed the omnibus bill on job creation and called for the government to do more to prevent mass layoffs during the COVID-19 pandemic. JP/Seto Wardhana (JP/Seto Wardhana)

Being able to work from home and receiving a full salary is a privilege for some groups of people during the COVID-19 pandemic. Millions of people in the world have lost their jobs. Others are obliged to take the risk of virus infection by working outside the home for the sake of their family’s survival.

In Indonesia alone, the National Development Planning Agency (Bappenas) has just announced an increase of the unemployed by 3.72 million. This figure, of course, excludes the workers whose wages are cut due to reduced working hours.

Meanwhile, the government has just announced economic growth of minus 5.3 percent in the second quarter of 2020 and is predicted to remain negative in the third quarter.  The World Bank in last July predicted that the recovery would take quite a long time. In fact, many studies show that long-term unemployment can affect individuals, society and the national economy. Those who have been unemployed for a long period of time tend to find it more difficult to find new jobs, earn lower wages, and are late in moving up their career ladder.

The government has provided emergency protection through various stimulus packages, one of which is the Pre-employment Card. Through this program, workers affected by termination of employment can receive cash benefits and online training. However, is that sufficient? What will be their future after their training?

When people are unemployed, there are at least two items they need. The first is a substitute for their lost income because they and their families have to continue their life. The second need is to find a new job which matches with their skills and qualifications. Comprehensive and integrated support systems for the unemployed, combining unemployment insurance, public employment services and training, help meet these needs.

In fact, the International Labor Organization through Convention No. 168 on Employment Promotion and Protection against Unemployment recommends partial and temporary income replacement through unemployment insurance schemes and promotion of productive employment through vocational training and job placement. A set of policies towards labor market reintegration of the unemployed is called active labor market policy (ALMP).

This system has been widely adopted by most of advanced economies and has proven to be effective in supporting workers affected by termination of employment due to COVID-19. Having joined the rank of upper-middle income countries, it is time for Indonesia to consider ALMP.

The current cash benefit scheme under the Pre-Employment Card, though the government intends well, may fall short of providing sufficient support for the unemployed if the pandemic prolongs.

First, it is publicly funded, thereby the scheme cannot be expanded without straining the state budget.

Ideally, cash benefits for unemployment are funded by an insurance system with contributions from employers, workers and government subsidies. We must collectively save for a rainy day. With unemployment insurance, income support kicks in immediately and the burden on the stage budget is much less than the case otherwise.

Second, job-relevance of training programs is crucial. It is good to check whether the training program is based on the up-to-date competency standards required by the industry. Business associations may wish to update competency standards of key jobs in their business domains and guide training and education providers.

Third, it would be better if the choice of training program is guided, ideally by career counselling professionals. Understanding skills requirements of available jobs in the labor market is important in selecting training programs. Labor Market Intelligence (LMI), an artificial intelligent (AI)-based labor data analytic, is necessary in this. And Public Employment Services (PES), if they capacity were built, could provide jobseekers with this service free of charge.

Instituting functioning unemployment protection system, or ALMP, calls for a seamless integration of social protection, skills development and employment policies. Several government institutions are involved in this system and their coordination is indispensable. Ideally, jobseekers can visit one-stop service office to register their unemployment status, claim unemployment benefits, receive guidance for training, and obtain support for job-search.

The economy will eventually bounce back once the pandemic abates. This brings optimism to many people. Nevertheless, we shall not forget the lessons learnt through the pandemic-imposed jobs crisis and prepare ourselves for future crises.

This kind of pandemic might happen again. Global economy repeats economic shocks, shaking the world of work each time. Let alone economic crises, there are always downturns of business cycle which affects the labor sector. In addition, Indonesia is prone to natural disasters which all of sudden damage infrastructure and productive assets, resulting in massive job destruction and loss of income for many families.

It is time for Indonesia to build a robust and reliable systems that protect workers against risks of unemployment. We collectively save during good days through a social insurance scheme because we know a rainy day will come again. We improve our training systems and public employment services so that we can count on them when we lose jobs.

Indonesia has elements of ALMP. We need to strengthen them and build-in effective linkages among them. This COVID-19 crisis should be a turning point to build better protection system for the unemployed.

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Kazutoshi Chatani is employment specialist and Fasrul is program officer for public employment service at International Labor Organization. These views are personal.

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.