Ridwan Max Sijabat, Jakarta – The occupational social security programs will certainly raise further problems and worsen the labor situation if they are implemented under the current employment and remuneration system.
The current employment system that has left millions of workers subject to the rampant abuse of the outsourcing and contractual systems has created job insecurity. Thousands of workers in industrial areas have to go back to their home villages and can no longer attain further education for their children when they are dismissed or their contracts are not extended without adequate severance pay, and they cannot get new jobs because of limited job opportunities amid a surplus in the domestic labor market.
Meanwhile, 70 percent of 117 million workers employed in the formal and informal sectors have no savings as they earn the minimum wage or even less, leaving them unable to save or pay contributions to the occupational social security programs.
The occupational social security programs, which are a blend of social aids and social insurance, are only effective if jobs are relatively well paid. Law No. 40/2004 on National Social Security System stipulates employment for a consecutive 15 years minimum for the old-age risk and pension benefit schemes.
Workers cannot enjoy their retirement, and in many cases have to work during their retirement age because of the low old-age risk and pension benefits under Law No. 3/1992 on Social Security Programs for Workers (Jamsostek).
Rampant outsourcing needs to be reigned in immediately in accordance with the 2003 Labor Law to provide job security for most workers, with permanent status in their workplace, while supervision has to be intensified to ensure that all companies, including outsourcing ones, comply with the law.
Minor revisions of dismissals and severance pay in the labor law may be needed to encourage employers to give permanent status to their workers and to prevent employers from outsourcing their core and non-core jobs to other companies. Many employers have preferred to outsource some of their jobs or recruit workers on a contractual basis to minimize their labor costs and to avoid large pay-offs when they have to dismiss workers or downsize their labor force.
Softening or deregulating the dismissal mechanism and tightening outsourcing could be a win-win solution to assure job security, maintain workers' loyalty and promote industrial harmony between workers and their employers.
The government, as regulator, should also show its political commitment to reforming the remuneration system and to end the cheap-labor policy so that the majority of workers can survive and support their families while saving for a better future. The remuneration system based on provincial or regional minimum wages has frequently met strong opposition from workers because most, including those working in the informal sector, have felt exploited and underpaid.
The key problem is that the remuneration system is based on the nominal wage and not on workers' real needs. The nominal wage of Rp 1.5 million (US$155.9) for a single worker in Jakarta is relatively high but it is not based on real needs even though it is accompanied by an index of prices in the capital city. Real wages should take all factors into consideration, including the inflation rate, transportation, housing, saving and education.
If employers, workers and the government had a common understanding on the comprehensive wage elements, the current minimum wage in Jakarta would be raised by at least 100 percent to between Rp 3 million and Rp 3.5 million to allow workers to live a decent life and be able to contribute to social security programs.
If the real wage was set at Rp 3 million for a single worker in the capital city he or she could put aside around 10 percent or Rp 300,000 of it for savings to pay their contribution to the old-age risk and pension program.
And if employers and their workers shared 10 percent each in their contribution to the occupational social security programs, workers would receive higher compensation and benefits in terms of occupational accident or death insurance and when they retired. The benefits would certainly be far higher than the ones received under the Jamsostek programs.
With the 5 percent premium proposed by the government for the national healthcare program, workers would pay in total 25 percent of their monthly wages in premiums to the five mandatory programs. Workers would really pay only 10 percent of their monthly wages while employers would account for the remaining 15 percent.
If compared to neighboring countries such as Malaysia and Singapore, the percentage of contribution is a relatively modest figure bearing in mind the country's annual economic growth of between 6 and 6.5 percent over the last eight years with a fading hope that it will be higher in the next decades.
Malaysian workers and their employers pay in total 30 percent in their contributions to the Employment Providend Fund (EPF) while those in Singapore contribute in total 40 percent under the Central Providend Fund (CPF).
Employment and wage reform is expected to allow at least 50 percent of the workforce to take an active part in the national social security programs and to ensure their universal coverage. It also has to be supported by professionalism by the two assigned insurance providers and a quality service for participants.
The professionalism of Askes (Health Assurance) and Jamsostek in running the national programs and reinvesting funds collected from participants is absolutely essential to make them world class providers and to enable them to provide maximum benefits to participants.
Learning from the current social security programs' low coverage and Malaysia's success in the EPF's universal coverage, it is not enough for Jamsostek to rely on its persuasive approach but it should be equipped by the government with investigatory powers to bring to court companies and employers violating the law. So far, only 30 percent or 11 million of 35 million workers in the formal sector have been registered with Jamsostek because of Jamsostek's lack of investigatory powers.
[The author is staff writer at the Jakarta Post.]