Social security for workers in the informal sector is an urgent national priority
Social security for workers in the informal sector is an urgent national priority

Social security for workers in the informal sector is an urgent national priority

As we approach yet another Labor Day on May 1, many economists believe that one of the priorities of the government is to expand social security so that it covers all workers in the informal sector.

The problem is urgent for Thailand, as an estimated 19.6 million people worked in the informal sector last year compared to 18.1 million in the formal sector.

The informal sector includes freelance workers, food vendors, street vendors, taxi drivers, the self-employed and farmers. They are susceptible to economic shocks or health crises such as COVID-19 pandemic. They are also vulnerable to hardships when they reach retirement age, as they have very little savings for their retirement years.

“We need to consider on a priority basis how we can extend social protection to cover those working in the informal sector,” said Yongyuth Chalamwong, research director at the Thailand Development Research Institute (TDRI).

Yongyuth’s view is an echo of other academics who want to see workers in the informal and formal sector treated in the same way, or at least to reduce the difference between the two.

Under Section 33 of the Social Security Act BE 2533 (1990), workers in the formal sector also enjoy far better protection as they make greater contributions to the Social Security Fund (SSF). Yet they have their own problem of insufficient retirement savings.

Social protection for workers in the formal sector is mandatory. Employees are entitled to receive the following benefits from SSF:

(1) unemployment benefit in the event of injury or illness (2) maternity benefit (3) invalidity benefits (disability) (4) death benefit (5) child benefit (6) old-age benefit (7) unemployment benefit.

Extension of social protection

In recent years, the government has sought to extend social protection by extending social rights under the current Social Security Act to workers who do not have employers.

Section 40 of the Social Security Act allows workers in informal sectors to contribute to the SSF on a voluntary basis.

There are three options for workers aged 15-65 to choose from:

  • Contribution Bt70 per month

They are entitled to receive three services – 300 Bt per. day for injuries and illness, 500-1,000 Bt per month for disability benefits and 25,000 Bt for funeral expenses.

They will receive the extra old age benefits at 50 Bt per. month.

They are entitled to receive 300 Bt per day for injuries and illness, 500-1,000 Bt per month as disability benefits, 50,000 Bt for funeral expenses, 150 Bt per month as an old-age benefit, s and 200 Bt per month for childcare.

To ease 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 country’s workforce included 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 number remains 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 northern, northeastern and southern part of the country has more workers in the informal sector than in the formal sector.

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.

Labor Day brings some cheers to Thailand’s 20 million informal workers

The impact of COVID-19 on the informal sector

The number of insured workers under Section 40 rose last year to 10.57 million, an increase of about three times over the period before the pandemic. This was largely due to the government’s COVID-19 relief package, which offered cash distributions to workers on condition that they registered with the SSF to participate under section 40; they were entitled to receive a cash dividend of 5,000 Bt per month for two months.

Deterioration of working welfare

Globalization has already negatively affected the bargaining power of the labor force, as governments usually compete to attract foreign direct investment and tend to side with employers.

“The Covid pandemic has made workers more vulnerable as their bargaining power has fallen even more,” said Lae Dilokvidhyarat, a labor economist at Chulalongkorn University.

They could easily be laid off by employers, citing business sustainability reasons, he said.

Many workers also have to pay the cost of weekly COVID-19 tests before starting work every Monday, Lae pointed out.

Several groups of workers have no access to social protection during the pandemic. For example, day laborers lose their income if they are unable to work when they receive COVID-19.

Large uninsured workforce

Despite a jump in the number of informal workers joining SSF under section 40 of the Social Security Act, a large number of workers are expected to remain outside its area of ​​competence, leaving only 10.57 million insured out 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, Bank for Agriculture and Agricultural Cooperatives, and Social Security Office have fought for farmers across the country to join the SSF.

A possible solution

A research team at TDRI conducted a study and found that workers in the informal sector are not satisfied with the benefits under section 40.

The team has proposed to the government to increase the retirement benefits for workers joining under Section 40. After their retirement, they should receive at least 3,000 Bt per month instead of the current Bt50 or Bt150. The majority of respondents agreed with the proposal to increase workers’ contributions to 1,000 Bt and 2,000 Bt per month for 20 years.

On the administration side, researchers suggested that the government would need to increase tax revenues. They could raise the VAT rate from 7 percent to 10 percent, which will generate an additional Bt200 billion in revenue for the government. Researchers believe it would help create a social security fund to cover all workers in the informal sector and they would be eligible to receive higher benefits. Academics see this as an urgent issue as Thailand is heading into an aging society.

Minimum wage and migrant labor

Workers often demand an increase in the minimum wage on May 1, citing rising living costs. Even before Labor Day, groups of workers and political activists in January this year called on the Palang Pracharath party-led coalition government to raise the minimum wage to Bt425 per tonne. day from the current Bt313 to Bt336.

The ruling party had promised a minimum wage from Bt400 to 425 Bt during its election campaign in 2019. Thailand most recently raised the minimum wage in 2020.

Lae suggested that the government could choose to increase the real income of the workers, for example by giving low-income workers a big discount for using mass transportation in Bangkok.

Meanwhile, news reports suggested that many migrant workers from neighboring countries had entered the country illegally.

“Before COVID-19, Thailand employed about three million migrant workers. Most of them returned to their countries after the pandemic. Now they want to return and the demand for labor is high. The government has failed to manage migrant workers effectively,” Lae lamented.

By Thai PBS World’s Business Desk

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