Time to reform social protection policies

SOCIAL Protection includes policies, programs and measures aimed at ensuring a basic standard of living for the people of a nation and protecting them against major shocks such as serious illnesses, injuries and unemployment.

The Covid-19 pandemic which has destroyed people’s livelihoods has put a strain on current social protection policies. Bank Negara pointed out that there are three components of social protection in Malaysia: social safety nets, social insurance and labor market policies.

The social safety net aims to ensure that basic needs are met, such as food, housing, health and education, as well as efforts to eradicate poverty. Forms of social safety net include cash distributions, as well as in-kind benefits such as public hospitals and schools.

To ease people’s burden, the government has launched stimulus packages to help workers affected by the pandemic. Direct cash assistance ranging from RM500 to 1,600 (under Bantuan Prihatin Nasional) and one-time cash assistance from RM350 to 1,800 (Bantuan Prihatin Rakyat) have been provided to those affected.

The poverty line wage in Malaysia is RM2,208 per month, with RM1,169 for food and RM1,038 for non-food items. According to Bank Negara Malaysia (BNM), the living wage in Kuala Lumpur for single couples without children and couples with two children is RM2,700, RM4,500 and RM6,500 respectively.

Thus, it is clear that the aid provided is significantly below the poverty line or the living wage. Support for families and households is also clearly insufficient. Social insurance aims to provide resilience and support to individuals and families in the face of shocks, and to prevent poverty. Most workers contribute to the support fund. Two of the main social schemes in Malaysia are EPF (Employees Provident Fund) and Socso (Social Security Organisation).

According to the Unicef ​​and UNFPA (United Nations Population Fund) report “Families on Edge: Impact of Covid-19 on low income urban families”:

52% of households are not protected by EPF/Socso,

· Women face a greater challenge – 57% of female households are unprotected.

The workers most affected by the lack of social protection are those in the informal sector, micro-enterprises such as hawkers and small businesses as well as workers in the gig economy. Through the i-Letsari, i-Sinar and i-Chitra schemes, EPF contributors were allowed to withdraw their savings for their needs and those of their families, in order to cope with economic challenges.

Based on the withdrawals for the three schemes, it is highly likely that the savings remaining after withdrawal by many contributors are nearly exhausted. They would have nothing left for their family’s needs, such as education and housing, or would have enough for their retirement. Due to their urgent current needs, their future critical needs had to be dropped.

Labor market policies aim to increase people’s economic opportunities and potential, and include job placement programmes, upskilling and retraining programs and employment incentives. Labor market policies include minimum wage and worker protection laws.

The government also helped through the employment insurance scheme, covering 80% of workers’ wages for the first month, 50% for the second month, 40% for the third and fourth months, and 30% for the fifth and sixth month. However, this support was only given in the early stages of the pandemic, in March 2020; after which further support was lacking.

According to a survey by the Ministry of Entrepreneurs and Co-operatives Development in July 2021, over 90% of businesses had no insurance while 70% had no safety net to fall back on in the event of job loss.

Safety nets are essential to ensure that vulnerable families obtain a certain level of support with a minimum standard of living. Yet the BNM report, “A Vision for Social Protection in Malaysia,” says safety net programs are ineffective because they are run by multiple agencies at the federal and state levels.

He said, for example, that despite large expenditures of RM17.1 billion (1.1% of gross domestic product), disbursements under each program were low and insufficient to ensure that households most vulnerable can achieve minimum income and living standards.

Social protection expert Professor Emeritus Norma Mansor said social protection programs in Malaysia are inadequate to mitigate risks and shocks. She pointed out that the system is fragmented and inefficient, with low coverage.

Clearly, there is a critical need to reform current social protection policies in Malaysia.

Paul Selva RajSecretary General, FOMCA.
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Joel C. Hicks