Social security for informal sector labour a pressing national priority
As we approach another Labour Day on May 1, many economists believe one of the priorities for the government is to expand social security so as to cover all workers in the informal sector.
The issue is pressing for Thailand, as an estimated 19.6 million people last year worked in the informal sector compared to 18.1 million in the formal sector.
The informal sector comprises freelance workers, food sellers, street vendors, taxi drivers, self-employed people, and farmers. They are susceptible to economic shocks or health crises such as the COVID-19 pandemic. They are also vulnerable to face hardships when they reach retirement age, as they have very little savings for their retired years.
“We need to consider on a priority how we can expand social protection to cover those working in the informal sector,” said Yongyuth Chalamwong, research director at Thailand Development Research Institute (TDRI).
Yongyuth’s view echoes those of other academics who want to see workers in the informal and formal sectors treated the same way, or to at least reduce the disparity between the two.
Under Section 33 of the Social Security Act BE 2533 (1990), workers in the formal sector enjoy far better protection as well, as they make larger contributions to the Social Security Fund (SSF). Yet, they have their own problem of inadequate savings for retirement.
Social protection for workers in the formal sector is mandatory. Employees are entitled to receive the following benefits from the SSF:
(1) injury or sickness benefits (2) maternity benefits (3) invalidity (disability) benefits (4) death benefits (5) child benefits (6) old-age benefits (7) unemployment benefits.
Expanding social protection
In recent years, the government has tried to expand social protection by extending social entitlement under the current social security law to cover workers who do not have employers.
Section 40 of the Social Security Act allows workers in informal sectors to contribute on a voluntary basis to the SSF.
There are three options for workers aged between 15-65 years to choose from:
- Contribute Bt70 per month
They are entitled to receive three benefits — Bt300 per day for injury and sickness, Bt500-1,000 a month for invalidity benefits, and Bt25,000 for funeral expenses.
- Contribute Bt100 a month
They will receive the additional old-age benefits at Bt50 per month.
- Contribute Bt300 a month
They are entitled to receive Bt300 per day for injury and sickness, Bt500-1,000 a month as invalidity benefits, Bt50,000 for funeral expenses, Bt150 a month as an old-age benefit,s and Bt200 a month for child welfare.
To relieve their financial burden during the COVID-19 crisis, the government has temporarily reduced their contribution to 60 percent of the normal amount until the end of July this year.
The informal sector
The number of informal workers is many more than those employed in the formal sector.
Last year, the labor force of the country comprised 37.7 million people — 18.1 million in the formal sector and 19.6 million in the informal sector.
Surprisingly, the number of people working in the informal sector saw a decline last year, although the numbers remain large.
According to the National Statistical Office, the number of workers in the informal sector totaled 20.8 million in 2017; 21.2 million in 2018; 20.4 million in 2019; and 20.4 million in 2020.
The North, Northeast, and South of the country have more workers in the informal sector than in the formal sector.
The Northeast topped the list last year with informal workers representing 75.2 percent of the total workforce against 24.8 percent in the formal sector.
It was followed by 68.5 percent in the North and 52.3 percent in the South.
Impact of COVID-19 on informal sector
The number of insured workers under Section 40 jumped last year to 10.57 million, up about three times compared to the period before the pandemic. It was largely due to the government’s COVID-19 relief package which offered cash handouts to workers on the condition that they registered with the SSF to participate under Section 40; they were entitled to receive a cash handout of Bt5,000 a month for two months.
Worsening labor welfare
Globalization has already adversely impacted the bargaining power of labor, as governments usually compete to attract foreign direct investment and tend to side with the employers.
“The COVID pandemic has made workers more vulnerable, as their bargaining power has decreased even further,” said Lae Dilokvidhyarat, labor economist at Chulalongkorn University.
They could easily be laid off by employers, citing business sustainability reasons, he said.
Many workers also have to shoulder the cost of weekly COVID-19 tests before they start work every Monday, Lae pointed out.
Several groups of workers have no access to social protection during the pandemic. For example, daily wage laborers lose their income if they are unable to work when they contract COVID-19.
Large uninsured workforce
Despite a jump in informal workers joining the SSF under Section 40 of the social security law, a large number of workers are expected to remain beyond its purview, leaving only 10.57 million insured of the 19.6 million in the informal sector.
So, about nine million people are not yet covered by Section 40. The Department of Agricultural Extension, the Bank for Agriculture and Agricultural Cooperatives, and the Social Security Office have been campaigning for farmers nationwide to join the SSF.
A possible solution
A research team at the TDRI made a survey and found that workers in the informal sector are not happy with the benefits under Section 40.
The team has proposed to the government to increase old-age benefits for workers who join under Section 40. After their retirement, they should get at least Bt3,000 a month instead of the current Bt50 or Bt150. The majority of respondents agreed with the proposal to increase the contribution by workers to Bt1,000 and Bt2,000 a month for 20 years.
On the administration side, researchers suggested that the government would need to increase tax revenue. They could hike the value-added tax rate from 7 percent to 10 percent, which will generate an additional Bt200 billion in revenue for the government. Researchers believe that it would help create a social security fund to cover all workers in the informal sector and they will be entitled to receive higher benefits. Academics see this as an urgent issue, as Thailand is entering an aging society.
Minimum wage and migrant labor
Laborers often call for an increase in the minimum wage on May 1, citing the rising cost of living. Even before Labour Day, groups of laborers and political activists in January this year called on the Palang Pracharath Party-led coalition government to increase the minimum wage to Bt425 per day from the current Bt313 to Bt336.
The ruling party had promised a Bt400 to Bt425 minimum wage during its general election campaign in 2019. Thailand last hiked the minimum wage in 2020.
Lae suggested that the government could choose to increase the real income of laborers, for example by giving low-income workers a big discount for using mass transit transport in Bangkok.
Meanwhile, news reports suggested that many migrant workers from neighboring countries have illegally entered the country.
“Before COVID-19, Thailand used to employ about three million migrant workers. Most of them went back to their countries after the pandemic. Now they want to come back and the demand for labor is high. The government has failed to manage migrant workers efficiently,” Lae lamented.
By Thai PBS World’s Business Desk