The Role Important Of Social Security In The Economy And Labour Market


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The Role Important Of Social Security In The Economy And Labour Market

  1. 1. In search of an enhanced social security for Uganda Introduction Social security plays a very important role in the economic and social livelihoods of every citizen. It protects people from the risks of loss of income and livelihood arising out of both certain and uncertain events ranging from a wonderful thing such as childbearing to a terrible illness or accident leading to death of a major bread winner. In the worst case scenario, as has happened following the recent world economic crisis, the loss of jobs can have a dampening effect on the potential growth and recovery of an economy due to the fall in demand following loss of income. Most developed economies have been able to administer their stimulus packages through the social security system in form of enhanced pensions and unemployment benefits. Clearly, the role of a robust social security system-one that can help people keep their jobs and support them even in the most critical time of need cannot be underestimated. The right to social security The basic right to social security is universal. As early as 1944, Social security was established as a basic human right in the ILO’s Declaration of
  2. 2. Philadelphia and its Income Security Recommendation (No. 67). This right is upheld in the Universal Declaration of Human Rights, 1948, and the International Covenant on Economic, Social and Cultural Rights, 1966. Article 22 of the Universal Declaration of Human Rights recognized the right of every member of society to Social Security and to the realization of the economic, social and cultural rights indispensable for his dignity and the free development of his personality. In the same spirit, several articles of the Uganda Constitution recognize the right of its citizens to basic social services. Sadly, the ILO1 estimates that over 80 percent of the world’s population can only dream about access to social protection. In Uganda, formal social security takes care of no more than 5 percent of the working population! The ILO minimum social security standard The International Labor organisation has been the lead agency on social security since 1919. The ILO Social Security (Minimum Standards) Convention, 1 ILO, (2008): Setting social security standards in a global society. An analysis of present state and practice and of future options for global social security standard setting in the International Labour Organization. Consultation Paper /International Labour Office, Social Security Department -Geneva
  3. 3. 1952 (No. 102), is the only international instrument, based on basic social security principles, that establishes worldwide-agreed minimum standards for all nine branches of social security. These branches are: medical care, sickness benefit; unemployment benefit; old-age benefit; employment injury benefit; family benefit; maternity benefit; invalidity benefit; and survivors' benefit. Definition of Social Security The International Labour organisation defines Social Security as “a set of public measures to protect individuals against the risk of loss or substantial reduction in income due to invalidity, occupational injury, sickness, maternity, old age, death, unemployment, children and family obligations.
  4. 4. Despite the clear The impact of Social Security benefits of social Social security has a powerful impact at all levels security, in 2003 of society. It provides workers and their families the ILO2 estimated with access to health care and with protection that only one on against loss of income, whether it is for short five people in the periods of unemployment or sickness or world had access maternity or for a longer time due to invalidity to adequate social or employment injury. It provides older people security and that with income security in their retirement years. more than half of Children benefit from social security the world’s programmes designed to help their families cope population did not with the cost of education. For employers and have any form of enterprises, social security helps maintain stable social security labour relations and a productive workforce. coverage. The And social security can contribute to social situation was cohesion and to a country’s overall growth and worse in sub- development by bolstering living standards, saharan Africa cushioning the effects of structural and where no more technological change on people and thereby than 5-10 percent providing the basis for a more positive approach of the working toward globalization. population had access to any form Source: ILO (2003)-Facts on Social Security of social security. This situation has barely changed. Social security in Uganda 2 ILO(2003) Facts on Social Security, Geneva
  5. 5. For the majority of Ugandan workers and their families social security remains a distant dream. The biggest formal social security schemes- National Social Security Fund (NSSF) and the Public Service pension scheme (PSPS) provide coverage for no more than 6 percent of the working population. The NSSF a contributory scheme covers about 300,000 employees in the formal private sector while the PSPS is tax financed and covers about 260,000 government employees. Both provide old age, disability and survivors’ benefits. There are plans to introduce medical insurance for both groups of workers in the near future. For the majority (95 percent) and most vulnerable of workers in the informal sector-small scale trade and agriculture, there are no formal mechanisms to save for a rainy day. As a result, people in these sectors work till they drop and most of them end up destitute in old age or physical disability. The situation is even worse in the case of death of a breadwinner. Most children from such families drop out of school perpetuating a vicious cycle of poverty and underdevelopment.
  6. 6. Figure 1-Social Security coverage in Uganda by scheme Uganda: Social Security coverage, 2010 3% 2% 0% NSSF PSPS Other Uncovered 95% Can Uganda afford more social security coverage Experts agree that the higher levels of social security coverage in developed countries were not purely a result of economic achievement because the most prosperous countries are not necessarily the ones with the highest coverage. Social security coverage is rather a function of political will and unique national socio-cultural factors that foster a sense of solidarity and minimum well-being for citizens. Over the last decade, several developing countries have registered consistent rates of economic growth but sustained high levels of poverty and vulnerability for their populations. In most of these countries, the levels of inequality have worsened and as a result face increased
  7. 7. social tensions. Consequently there has been a paradigm shift in the development debate with increased calls for a rights based social security system across the globe. The millennium development goals initiative is certainly one of those that promote a more equitable global society. Challenges for social security in Uganda Uganda’s social security system covers too few and currently offers inadequate benefits. Over 95 percent of the most vulnerable active labour force and their families in the informal sector have no form of social security coverage. The level of protection available for members of NSSF and the PSPS is inadequate; only old age, death and disability risks are covered. The current form of cover offered under the NSSF provident scheme does not insure the member/beneficiary against the financial risks in the market and guarantee a regular income upon retirement. Plans dating back to 2001 to introduce medical insurance are yet to be implemented and the pensions sector is facing an impending liberalisation. The informal sector poses a unique challenge for the extension of social security. The relative lack of an organised platform to address issues for workers in this sector fuels their further exclusion
  8. 8. and lack of voice in policy debate. It has been previously assumed that by providing incentives and facilities like feeder roads to farmers and small scale traders would automatically transform their lives out of poverty and vulnerability. Unfortunately, the reality is that the market is a terrible mechanism when it comes to addressing social imbalances it causes once it fails, as it always will. There is therefore a clear need for social security reform that starts with defining the strategic direction that country needs to take. In view of the high level of poverty and vulnerability across the country, government and all stakeholders-labour, employers and the public need to rally around a common position to extend social security coverage and enhance the adequacy and relevance of benefits. The reforms that are needed entail building consensus on the form and timing of liberalisation, the development of a more inclusive social security regime including social health insurance and improving the governance of social security through strengthening the governance and regulatory environment. It is possible to pursue a rights based approach to social security and protect all citizens. The efforts of
  9. 9. the Ministry of Gender Labour and Social development to pilot test a cash grants system for the most vulnerable is a step in the right direction. Estimates from a recent study by the ILO show that a basic universal old age pension would cost no more than 2 percent of GDP and can be therefore affordable if there is political will. The role of organised labour Trade Unions across the world have been at the forefront of championing the rights of workers. As key stakeholders, labour can advocate for more involvement in the reform and governance of social security in Uganda. Labour unions need to engage members and reach out to all workers and forge a common position on the form of social security governance and reform. All ingredients for a robust social security system are in place. Uganda has steadily grown above 6 percent annually over the past several years. There are calls for a more responsive social security system by all workers and the government is keen on reforming the social security sector. The search for an enhanced social security system at this point is not far fetched.