LABOR MARKET STABILIZATION THANKS TO EMPLOYMENT INSURANCE

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The Covid-19 pandemic has changed all facets of our lives on a deep level. What started as a health crisis has turned into a multifaceted conundrum on the economic and social fronts, spurring our primary instincts to adjust to a new normal.

Globally, we are all waging an invisible war with the acute goal of saving lives and livelihoods. Our labor market is not immune to global economic volatility.

Inevitably, the implementation of strict SOPs aimed at alleviating the health crisis slowed down business activities, and ultimately the labor market. As a result, employees who lost their jobs found it even more difficult to find suitable employment due to the lack of opportunities.

History has proven that in times of crisis there will be an increase in unemployment and job losses (LOE). Traditionally, as businesses transform and adapt to structural or cyclical changes, the LOE typically hovers around 40,000, which will then translate into a natural unemployment rate of around 3.3%.

The direct impact of layoffs is regressive because job losses would affect low wages more than high wages.

Since two-thirds of total household income in Malaysia comes from the labor market, their livelihoods would be severely affected by the pandemic. This requires immediate and appropriate assistance; efforts to improve income inequality and the socio-economic conditions of everyday Malaysians must focus on labor market interventions.

In this context, the Government had taken an important step by setting up the Employment Insurance System (EIS) in January 2018.

The EIS, managed and administered by the Social Security Organization (Socso) under the Employment Insurance System Act 2017 (Act 800), has helped cushion the livelihoods of affected workers. Under the EIS, workers who meet the conditions of Law 800 are entitled to financial assistance during the period of unemployment.

Law 800 provides that insured persons who have lost their jobs can receive a job search allowance (JSA) between three and six months to partially cover the loss of income. The government is providing additional funds under the Prihatin SIP to extend the JSA for another three months at a reduced rate of 30% per month. If the affected workers manage to find a new job while receiving the JSA, they are also entitled to an early re-employment allowance (ERA).

The main motivation is to protect workers against shocks and job losses. Thanks to the EIS, nearly 200,000 Malaysian workers were saved from the total loss of their income and inadvertently plunged into poverty.

The core of the program remains the protection of the economic well-being of low-income groups. The role of EIS became even more important at the height of the pandemic crisis, where the number of reported LOEs increased exponentially.

To further stabilize the market, the EIS also promotes employability through training and retraining, potentially facilitating their transition and improving worker productivity.

As a unique function of EI, the program requires recipients of EI benefits to be able and willing to seek, train and accept offers through the Socso ecosystem – employment assistance comprehensive and worker services.

Through the Socso ecosystem, from January 2020 to August 2021, Socso provided monetary assistance of RM 628 million (excluding the retraining program) to workers who lost their jobs and disbursed over $ 17 billion. de RM to implement wage subsidies allowing employers to retain their local workers.

Over 335,000 employers and 2.84 million workers have also benefited from the wage subsidy program.

The government has also disbursed an additional RM 1.2 billion for the implementation of hiring incentives under Pemulih to encourage employers to hire unemployed people, insured people who have lost their jobs as well as workers. vulnerable groups.

The sums disbursed through EIS also serve as a multiplier effect for the economy by maintaining the level of consumption and helping companies to maintain themselves during this difficult period.

The Covid-19 pandemic has definitely exposed the flaws in the system and dealt a heavy blow to the Malaysian economy. During the period, unemployment fell from an average rate of 3.3% in 2019 to 4.5% in 2020, inducing an additional 202,800 unemployed.

The EIS plays an essential role in filling the opportunities of job seekers. In June 2020, the government also mandated Socso via EIS to administer the national employment portal, MYFutureJobs.

In real time to date, MYFutureJobs has 672,411 active job seekers and between 180,000 and 200,000 active job offers. Coupled with a deep hands-on approach, EIS has successfully placed 370,380 job seekers since 2020.

Through the implementation of various active labor market programs, EIS has globally helped thousands of workers, especially locals during the pandemic. It is therefore an impetus to expand the coverage and functions of Employment Insurance in Malaysia.

One of the key lessons learned from the pandemic crisis is to extend Employment Insurance inclusively to all workers, including the self-employed, and in the odd-job economy. A pilot program, SIP Prihatin 2.0 is currently being implemented under the Pemulih program to provide job search allowances to unregistered and unemployed job seekers.

Other areas of improvement and reform of the employment insurance system in Malaysia are currently under consideration by the Ministry of Human Resources and Socso. Anticipating the future labor market situation which is dynamic and highly dependent on a volatile economy, Socso is making progressive and proactive efforts to further improve the state of social protection as we stand in solidarity with all workers in Malaysia.

Datuk Seri Dr Mohammed Azman Aziz Mohammed is Managing Director, Social Security Organization (Socso), Malaysia


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