The Social Security Law is a critical component of any modern society’s safety net, providing essential protections for individuals and families in times of need. However, as lawmakers consider potential revisions to this vital legislation, it’s essential to ensure that their focus is not solely on surface-level adjustments. Instead, policymakers must carefully consider the impact of any changes on the system’s foundation, which will have far-reaching consequences for generations to come.
It is necessary to amend the Law on Social Insurance in the direction of keeping employees in the security system; however, there needs to be a group of more synchronous solutions, instead of just focusing on limiting people to withdraw social insurance once.
Water drops overflow after Amendments to Social Security Law
In 2021, more than 960,000 people requested one-time social insurance withdrawal, a record number in the period 2016-2021. The economic shock caused by the COVID pandemic caused millions of workers to lose their jobs at that time, some people were able to return to their hometowns, but many people had to stay in the city because of the blockade order. About a year later, there were long lines of workers waiting outside the social insurance agencies in Ho Chi Minh City. Ho Chi Minh City from dawn to apply for a one-time subsidy, a phenomenon that the press described as “massive”. It can be easily seen that many unemployed workers have not found new jobs and have no other choice but have to rely on social insurance contributions to use during emergencies and difficulties.
Although the economy has prospered, it is still traumatized after the pandemic, not to mention the impact of the Russia-Ukraine conflict. That has led to many jobs in the export processing industries, especially the garment and footwear industries, which have been hit hard recently due to lower consumer demand in major export markets such as the US and China. Europe, leading to a decrease in orders or no production orders for factories. By the end of 2022, many companies in the southern region were forced to close or downsize. According to statistics, more than 600,000 workers are affected, of which about 34,000 workers lose their jobs, the rest have their working hours reduced or wait for work. If workers affected by the wave of job losses at the end of 2022 cannot find new jobs within a year, it is very likely that many of them will think about withdrawing social insurance to cover their lives. .
Employees consider the amount of social insurance contributions, some of which comes from their labor, as their own savings.
However, the phenomenon of people “rushing” to withdraw social insurance after the pandemic is only the last drop and a predictable outcome. From 2016 to 2021, the social insurance system recorded an additional 4.23 million people joining but 4.06 million people leaving. More than 98% of cases are people who have quit their jobs and stopped paying social insurance within a year. Most of the people who applied for social insurance withdrawal were under the age of 40 and worked in the non-state sector. Although there are no official statistics, a large proportion of those applying for social insurance withdrawal are low-skilled workers in the garment, footwear, and processing industries. The shocks from the COVID pandemic and the wave of layoffs at the end of 2022 only deepen the pre-existing pre-existing precariousness in workers’ livelihoods. The employment situation in a number of outsourcing and processing industries has always been unstable. These are industries that are vulnerable to fluctuations in the global supply chain as well as dependent on supply coming from major markets. In the newspapers, from time to time, news about factories having to close or cut workers. There have been cases of foreign companies suddenly closing down and business owners running away while still owed salaries and social insurance of employees. Moreover, in the process of working, when employees still lack voice and bargaining ability, they are more likely to fall into situations such as not being able to sign formal contracts, being bullied by management, and reducing their benefits at work. workplace, reduced working hours, forced into short-term contracts (even if they already have indefinite contracts), or fired. Some groups, such as pregnant and nursing female workers, or workers over the age of 35, are also discriminated against because of prejudices about their ability and productivity.
But not only always face the risk of unemployment, even when they have a job, these workers also live in difficult and difficult circumstances. This is a topic that has been discussed a lot in the media, reports and surveys but still no significant changes. Although the State applies an annual increase in regional minimum wages, there is still a significant gap between the minimum wage and the minimum standard of living. With the current minimum wage, a former leader of the General Confederation of Labor said that this figure is still 15% below the minimum living needs of workers. Despite the fact that workers are often paid more than the minimum wage, the difference is mainly due to overtime. The 2021 figures estimate that the average income in HCMC. Ho Chi Minh City is still 12% below living income. According to a survey by the Institute of Workers and Trade Unions, about 30% of workers have no savings and often have to borrow to pay for daily living expenses in the family. The lives of migrant workers are especially difficult when they have to pay higher rents for accommodation and electricity and water bills, and at the same time face barriers to accessing public services in terms of health and education in the provinces. and the city where they just move in. The accumulated money is already small, many migrant workers are also responsible for supporting their parents and relatives back home.
For these people, the withdrawal of social insurance contributions is one of the solutions to help them cover difficulties in life. A study of mine in 2018 showed that, with low wages, high cost of living and little savings, workers view the amount of social insurance contributions, an amount of which comes from their labor. , is money to save for yourself. So, having managed in various ways, they have a legitimate desire to receive that money when income is reduced or when additional household expenses arise. The money withdrawn is often used to pay off debt, as well as to pay for the care and education of children, medical care and housing. There are many workers who use that money to find other ways to make a living, such as small business, freelance work, household business, or live in their hometown.
Evaluation of proposed amendments to the Law on Social Insurance
During the process of collecting comments on the draft Law on Social Insurance (amended) in March 2023, the one-time social insurance withdrawal is one of the priority issues in this law amendment. and is of great public interest. The increasing number of people withdrawing from social insurance is posing a big challenge to the social security system in recent years. As the pension system is the mainstay of the welfare system, an increase in the number of workers leaving the system will create a great burden on the state and society in taking care and supporting the group of people with no income. enter in old age.
The state has proposed a number of measures to keep workers in the system longer and make it easier for them to qualify for pensions. The first group of proposals is to reduce benefits from the one-time social insurance scheme: Employees can only withdraw the amount they contribute to the fund, while the amount paid by the employer will be kept and used by the State. used to pay part of the pension later. This is expected to help limit early withdrawals and keep workers in the safety net for longer.
The proposed amendments to the new law only solve the top part without considering the root cause of the increase in one-time social insurance withdrawals, which lies in the precarious situation of workers’ lives and jobs.
However, this proposal only solves the top part without considering the root cause of the increase in one-time social insurance withdrawals, which lies in the precarious situation of workers’ lives and jobs. The majority always consider the payment of social insurance as an economic support, a “rescue” for them in a desperate situation that is always waiting. Only those who have witnessed the hardships and deprivations of workers in hostels understand how much that money means to them. With the thought that the amount of social insurance contributions is their own money, employees feel they deserve to have access to that money to support themselves and their families when needed. Limiting the benefits of one-time social insurance benefits not only does not stop workers from withdrawing insurance (because life gives them no other choice) but is also likely to create a mixed reaction from employees, when it affects the interests they deem to be legitimate. This proposal has been included in the draft Law on Social Insurance (amended), just published in March 2023. Accordingly, employees can request a one-time withdrawal after 12 months of not participating in social insurance and the total number of years of participation is less than 20 years, but they can only handle no more than 50% of the amount contributed to the fund. However, the draft still has an option to keep the current regulations.
The second group of proposals aims to reduce the number of years participating in the system to receive pensions, from 20 years to 15 years, and in the long term to 10 years. There are three reasons for this suggestion. Firstly, for workers who joined the social insurance system quite late, this proposal will help them qualify for pensions. Second, this proposal also reflects the fact that the total working time of workers in the manufacturing and processing industries is usually not long. In apparel and footwear companies, for example, businesses often find ways to lay off older workers (usually those over the age of 35). This group of workers is at a disadvantage when looking for new jobs because most businesses prioritize recruiting young workers. Therefore, it is difficult for workers in these industries to accumulate enough 20 years of social insurance contributions. Reducing the minimum number of years is seen as making it easier for more people to access pensions and making pensions more attractive overall. Third, statistics show that the majority of workers who have withdrawn from social insurance once have an average total participation time of more than 10 years. Reducing the number of years of contribution to 15 years will “pull” them closer to retirement.
However, if we “pull” closer, it does not mean that it is true to reality. Many workers can’t wait for their pension not only because they don’t meet the minimum number of years to pay, but waiting for the time to receive the money – the legal retirement age – is too long. We can easily see, a typical female worker in the garment industry, if she works continuously and pays social insurance from the age of 20, by the age of 40, she has accumulated 20 years of participation, but she has to wait until 55. new age to receive pension. Many workers do not intend to work in factories until retirement age, as their health and productivity will decline after years of hard and hard labor. According to the Chairman of the Trade Union, Pou Yuen Company, which is the leather shoe company with the largest number of employees in the city. In Ho Chi Minh City as quoted in VnExpress newspaper, every year, about 500 to 600 elderly workers, especially those aged 40 and over, resign from the company. According to current regulations, when employees have paid social insurance contributions for full 20 years, they are not allowed to withdraw social insurance once but must wait until retirement age to receive pension. Among the workers who quit their jobs in Pou Yuen, there was a case where the workers took leave when they were only a few months short of 20 years of social insurance contributions; In other words, they choose the time to apply for leave before the social insurance contributions are kept in the system and can no longer be withdrawn. It can be seen that the general mentality of employees is “withdrawing money first” rather than “trying to pay for a full year to enjoy pension”. In the context that the skills and age of workers are not high, the fact that the retirement age is being increased according to the roadmap of the Labor Law even “pushes” them further to the retirement regime.
A proposal to reduce the minimum period for pension benefits from 20 years to 15 years has been included in the draft law. However, employees can still withdraw social insurance once if the total time participating in the system is less than 20 years. That means, for workers who have been involved for 15 to 20 years, they are eligible for pensions, while still having the option to withdraw their social insurance once. An open question is, how to keep this group of workers in the system? If one of the goals is to keep workers in the system, the impact of the above proposal is still unclear. In the long run, if the State does not make significant changes to social security policies, create transparency and publicity in the management and use of social insurance funds, there will be strong sanctions against enterprises. If the employer commits a violation, employees will still tend to choose to receive social insurance money for self-defense rather than entrusting it to the state.
With the main purpose of creating the best conditions for employees, the law drafting agency needs to survey and listen extensively to their opinions before promulgating the law, in order to ensure that the law comes to life and bring real benefits. It is necessary to amend the law in the direction of keeping workers in the security system; However, there should be more synchronous solutions instead of just focusing on solving the immediate problem of limiting the one-time withdrawal of social insurance. The reform of the welfare system should aim at two goals. The first is to strengthen workers’ confidence in the system by strengthening the enforcement of social insurance laws to better protect their interests. The second is to improve the lives of workers. It is necessary to have policies to help low-income workers and migrant workers better access social services. In parallel with those goals, trade unions at all levels also need to enhance the representative role of trade unions to help workers have a better voice in the workplace on issues related to legitimate rights and interests. , their legitimacy.□
Limitations in law enforcement as well as a lack of transparency in the management of social insurance funds also explain why people choose to leave the system. There have been many cases where enterprises have violated the law, seriously affecting the interests of employees, including the fact that enterprises appropriated social insurance money even though they have deducted the employee’s contribution from salary. their monthly. In addition, the news on the media about the deficit of the state-managed social insurance fund, or the risk of “breaking” the fund, has partly made workers confused and not really confident in their ability to pay. system insurance in the long run.