Ms. Corazon de la Paz-Bernardo
President, International Social Security Association
ISSA works in over 150 countries, including many in Asia, which it defines as stretching from the Middle East to the Pacific. As the world comes out of the financial crisis of 2008, many countries are seeing increasing demands placed on their social security systems. The world is turning to social security for the important role it plays in mitigating suffering, and it is the aim of ISSA to make social security accessible to every member of every society.
Certain trends can now be seen throughout East Asia. The countries of the region are increasingly implementing larger social security programs to ensure the creation of resilient and inclusive societies. Many countries are making progress in extending coverage and improving the administration of their schemes. Countries are also beginning to put into place integrated and multi-tiered systems, strengthening linkages between non-contribution and contribution programs. Social security programs everywhere are transforming from inflexible and rigid schemes into flexible and resilient ones. It is encouraging to see such progress in Asia.
Employment promotion and unemployment measures have positive impacts on individuals and society as a whole. Bahrain and Vietnam recently introduced unemployment programs. Jordan will introduce such a program next year. China and Australia are investing heavily into vocational training. Without these and other measures, the effect of the financial crisis on unemployment might be much higher today.
Every country in Asia faces the problem of having an aging population. An ever-increasing strain is being placed on pension systems. Governments across the region are responding to these challenges by improving health care systems for the elderly. Japan and the Republic of Korea are working to implement long-term care insurance systems.
There are three ways ISSA believes nations can effectively respond to pension problems in light of demographic aging. First, since older workers find it difficult to return to work after retirement, incentives should be implemented to assist the elderly with this decision. This may include policies such as raising the retirement age, obligatory investment plans, or investments in further training. Second, measures should be put in place to help older workers integrate more smoothly into the workplace. This may include assisted employment placement programs or other measures which remove the obstacles to finding and entering into new work.
|Third, educational and social awareness campaigns to reduce the stigma
against workers over 50 could greatly help in creating cultures that accept
older workers as valuable.
As for the pension schemes themselves, ISSA recommends countries move toward multitiered programs. Such a shift is already being seen in economies like the Republic of Korea, Brunei, the Republic of Maldives, and China.
In over a dozen countries in Latin America and the Caribbean, tax transfer programs are being implemented to support pension schemes. Economies in Asia as well should support such programs and work to extend further coverage to the poorest of the poor.
Turning to health care, the United Nations (UN) has reported that only one in five currently have adequate access to it in Asia. The countries of the region must work harder to fix this problem.
A large part of a good health care program is preventative medicine. Efforts to prevent occupational injuries and diseases are effective ways to lower health care costs. ISSA believes strongly in preventative measures, and that is why the organization has released the Seoul Declaration on Safety and Health at Work. Every day more and more businesses and organizations are coming out in support of this important declaration.
Another important issue relevant to social resilience in Asia is that of migrant workers. Social security for such workers is becoming an increasingly vital issue as economies in the region become further integrated. Both economies of origin and host economies are beginning to take this issue more seriously. Public financing for migrant worker health care programs is becoming ever more common, especially in the Gulf states. China is developing a pension scheme for migrant workers, and the Philippines already has one.
What factors are driving regional social security progress? There are three: strong political will, the inclusion of social security into national development strategies, and general increased efforts toward improving the effectiveness of governance.
There has never been a greater need for social security. In Asia, social security programs have been on national development agendas since the 1990s, and this may be a major factor behind why Asia seems to have recovered from the 2008 financial crisis faster than any other region.
A resilient society is one which prepares for risks ahead of time and responds appropriately in times of crisis. Through the recent crisis, we have witnessed firsthand the tremendous contribution social security can make. Social security programs can be expected to be a central part of development programs in the future as well, for it is through social security programs that countries are able to support their most important resource, the people.
|The strengthening of social resilience initiatives has become a hot topic
in many economies across the globe since the 2008 financial crisis. Although
heavily debated, clear policy prescriptions for the creation of more resilient
societies have yet to emerge. Specifically, in the Asia-Pacific, economists
have been tackling the concept of inclusive growth since the 1997 financial
crisis, and this is perhaps one of the reasons why many Asian economies
recovered faster from the more recent crisis than other countries in the
world. In the session on social resilience, meeting participants discussed
national pension schemes, national health care schemes, unemployment insurance
(UI), the macroeconomic impact of improving social safety nets, and the
findings of a PECC task force formed to study these topics.
The first speaker of the session, Prof. Charles Yuji Horioka, Osaka University, stated that he would be presenting on some of the findings of a PECC task force on social resilience, specifically on how the improvement of social safety nets affects savings rates. Four teams made up the PECC task force, including a pension team, a medical insurance team, a UI team, and a macroanalysis team. Prof. Horioka presented on the work of the last team.
The macroanalysis team was split into two groups, one focused on cross-country data, the other on domestic data gathered from a survey of Japanese households. Data from 23 economies was used for the cross-country study. Twelve of these economies were from emerging Asia, and the rest were Organization for Economic Co-operation and Development (OECD) countries. In total, these economies together account for 95% of the GDP produced in Asia.
The cross-country study produced a number of findings:
Turning to the results of the survey of Japanese households, Prof. Horioka explained that each household was asked, "How much do you expect to receive in pension benefits after you retire?" and that the answers were compared with responses on how much each household was saving for retirement. The study found that households which expected to receive more saved less.
Comparing these findings with the data from emerging economies, it can be expected that those economies dealing with rapidly aging populations will see their domestic savings rates increase or decrease based on the robustness of their national pension plans. Economies should therefore work to improve their financial sectors and give individuals more opportunities for stable investments. This will stimulate each economy and at the same time increase household wealth.
The second speaker of the session, Prof. Mukul Asher, National University of Singapore, began his presentation by questioning how pension promises could be made more credible. As a consequence of the global financial crisis of 2008, millions of aging people across Asia feel that the pensions they were promised when they were younger will not be delivered, or will not be delivered in full. This is artificially increasing household savings rates and having dire effects on many regional economies. Furthermore, rapid population aging across Asia means that this issue needs an urgent solution. Asia's global share of the elderly population will more than double in the next 20 years. By 2015, the single largest segment of the population in China, India, and the United States will be women over 70 years of age. Given these demographic shifts, in order to maintain economic sustainability, Asia will need to produce three-fifths of the new livelihoods created in the world from 2010 to 2030.
|An often-overlooked section of society struggling with the pension problem
is migratory workers. Many economies in Asia have totalization agreements
which allow migrants to contribute to pension schemes but, where this is
not possible, working agreements with pension plans built into them are
going to be necessary. In the wake of the 2008 financial crisis, the pension
plans of many nations are fiscally unsound.
There is thus a great need to implement pension reform. Governments should develop implementation packages for this. "Political acceptability" is the key phrase with regard to this issue. If governments put forward gigantic wish lists unable to gain the acceptance of the public, the issue will never get anywhere. Instead, it is important that governments come up with appropriate measures that can be accepted at all levels of society.
Greater competence in performing the core functions of pension schemes is needed. At the same time, countries should foster an environment in which it is easy for retirees to supplement their incomes through remunerative activities. If current trends persist, the average Asian retiree will be forced to supplement 5-15% of his/her income.
Regulatory measures should be put into place to assist with this. Regarding the requirements of pension reform, governments ought to consider how much of the money which goes through their pension systems goes to those who really need it. Policymakers should think about innovative approaches to pension delivery systems. There is a lack of reliable and standardized cross-country data on pension schemes. Hopefully, the raised interest of many Asian nations regarding pension reform will foster a new generation of high-quality researchers who can find solutions to the many problems the continent faces.
Dr. Yang Yiyong, Director General and Professor, Institute of Social Development Research, National Development & Reform Commission, P.R.C., presented on the work the Chinese government was doing to increase its social resilience. Increasing social disparity has become a major concern alongside the rapid growth occurring in China. China has moved away from being a planned economy and toward a new life as a socialist market economy. This shift has increased disparities and caused greater social friction.
The government of China has four solutions to these social pressures. First, it believes that the establishment of an "interest coordinating mechanism" will be necessary. Economic policies and improved social security will act as such a mechanism.
|Second, the government will work to create a "social safety valve"
to alleviate various social pressures and allow different social groups
to communicate rationally. Third, the economy has need of a "social
flow mechanism" to help those in the lower strata of society move
up. Finally, a "social management mechanism" comprising a system
to more strongly prevent and reprimand deviant wealth making is necessary.
China will continue to work toward the creation of a resilient society within its borders and cooperate with other economies for the creation of such a society throughout Asia. Dr. Yang concluded his presentation by stressing the importance of each economy cooperating to make the region's societies easier to live in.
The first commentator of the session, Prof. Noriyuki Takayama, Hitotsubashi University, spoke about the results of the PECC task force team looking into pension systems. The team divided up into three groups to study different topics related to pensions.
The first group found that most economies in Asia have implemented pay-as-you-go schemes throughout the 20th century, but as populations have shrunk and aged, these schemes have become unfeasible. Many economies are now backing away from these schemes and seeking out new solutions. The financing of new schemes requires new taxes, a politically unpopular prospect. However, without new schemes many of the worst off will not have access to any social safety net. The first group thus suggested that means testing may be the most viable option to maintain social safety nets and ensure that the poorest elderly receive the assistance they need.
The second group examined the pension situation in the Republic of Korea. With rising income inequalities, declining social mobility, and rapid aging, the Republic of Korea is in urgent need of a good solution for pension systems. The second group proposed that the government take a preventive and investable, user-oriented, and life cycle approach to this problem. The government should do this by reinforcing the basic social safety net, working to guarantee equal access to education throughout society, work to give everyone equal opportunities, and promote job creation.
The third group, of which Prof. Takayama was a member, delved into the social security system in Japan. Japan has achieved nearly universal coverage through its scheme but, given the fiscal pressures the scheme is experiencing, this may change. The system is also struggling with the challenge of how to handle irregular workers, who may not be eligible for social security under the traditional scheme when they are ready to retire. Here, again, Prof. Takayama suggested that means testing may be a solution.
The second commentator of the session, Dr. Etsuji Okamoto, National Institute of Public Health, summarized the work of the health insurance team. The team began by considering the role of health insurance. What is health insurance for? The team postulated that it is to protect households from unexpected health costs and to close the gap between the elderly and young and rich and poor. Health insurance is a type of income redistribution.
The team studied health insurance systems in Japan and China. The two economies are very different: Japan has a long history of health insurance but now faces the burden of an aging population, while China is benefiting from vibrant economic growth but possesses a health insurance scheme which is relatively new. Both economies will eventually be forced to deal with population aging.
In Japan, a health insurance scheme for the employed was implemented before the creation of a municipal national health insurance scheme. Structural changes have led the latter scheme to now cover most of the elderly population. Premiums are determined according to income. The wealthy pay more for health insurance than the poor do.
China also introduced a health insurance scheme in 2003. This scheme is supported by both premiums and subsidies from local governments. However, even among local governments there are high disparities, so there are certain areas in the economy where the scheme is unable to support everyone who needs help. These areas are assisted by the national government.
|The major conclusion to be drawn from the research of the health insurance
team is that population aging causes economic disparities to widen, but
that health insurance, with its role as an effective method for income
redistribution, can help fight against this problem. Governments should
consider subsidies for health insurance schemes aimed at covering the very
poor and the unemployed.
The last presenter of the session, Prof. Naoki Mitani, Kobe University, presented the results of the PECC task force UI team. The team analyzed how UI could be effectively implemented given a lack of significant resources in many economies to deal with employment issues.
Traditionally, it has been thought that UI is something which only industrialized economies can effectively introduce. The UI team, however, found that the specific economic problems of emerging and developed economies differ, and that examples can be found throughout emerging economies of the Asia-Pacific of successfully implemented UI schemes.
One such example is that of Thailand, which introduced a UI program in 2004. The PECC team believes the success of the program to be traced to two factors:
The UI team identified two key issues facing UI schemes in the near future:
Prof. Mitani concluded that it seemed possible to introduce UI into an economy without much cost and that its presence significantly enhances the social resilience of an economy.