THE Covid-19 pandemic had sparked the Kita Jaga Kita movement where society as a whole helped those in need.

Scenes of the hardcore poor getting aid from others went viral on social media during that period.

Malaysia is now entering “the transition to endemic” phase of Covid-19 and people are gradually going back to normal life.

However, given the rising cost of living, the social protection system issue is not a popular topic among politicians who tend to favour measures that could cover a large population instead of a particular group.

Are people who are still in need – the poor, the unemployed, the elderly, women and children – getting enough support?

This article is aimed at highlighting the issues that arise with the current social protection system and offers suggestions to make it more socially inclusive.

Exclusion of informal workers

Informal employment refers to workers without social protection (for example, retirement fund, employment injury insurance and so on).

In the context of Malaysia, informal employment without retirement arrangements (Employees Provident Fund savings) reached 39% in 2017 while informal employment without social security (Sosco coverage) reached 34%.

In other words, four out of 10 workers (as in total employment) are without social protection.

The rise of technologies has created an informality trend within the formal sector, notably those jobs sharing economics such as e-hailing and delivery platforms.

Informal workers are divided into two groups: the self-employed and employers who start and manage a business (loosely called new entrepreneurs).

In terms of retirement and social security protection, self-employed persons are eligible for EPF i-Saraan and Socso Self-Employment Social Security Scheme.

Since the wages of the self-employed are not fixed, it is understandable that the aforementioned contributions are not mandatory in general, except that Socso in the transport sector is mandatory.

There is a need to continuously create awareness among the self-employed, while for the employers who just started managing a business, they can only contribute to EPF voluntarily (caruman pilihan sendiri).

The other type of social welfare that formal workers are entitled to is unemployment benefit in the name of Employment Insurance Scheme (EIS), but is not applicable to the self-employed at the moment.

The discussion above is only reflecting a worker-based perspective, which reveals informality within the formal sector.

The other is a firm-based perspective that has to deal with firms that are not registered with the authorities (notably family business and own account workers) and these people are not adequately protected by the social insurance system.

Lack of formality, especially those working with informal firms, will lead to being excluded from social welfare benefits such as assistance to the poor, retirement fund, social security and unemployment benefits.

Those in the informal sectors are usually not entitled to social welfare benefits because they are able to register for welfare programmes (for example, Bantuan Keluarga Malaysia) since those firms are not registered with the authorities.

The issue is, those workers do not have a valid and legally recognised payslip and the company will not contribute to EPF, Socso and EIS for their employees.

The informality within the formal sector such as self-employed persons, new entrepreneurs and those in non-standard employment (wage-hour workers) should be continuously encouraged to contribute to EPF and subscribe to Socso voluntarily through awareness programmes. There should be unemployment insurance for them, too.

Re-imagine the social protection system

The social protection system shall begin when we are born, where children need to be protected to ensure their physical and cognitive growth is taken care of.

The free breakfast programme for primary school children is considered an example of a social protection programme for the young in Malaysia.

Apart from that, it should also provide assistance, public retirement fund, social security, unemployment benefits to the groups in need such as women, persons with disability and indigenous people.

A central agency is needed for coordinating different welfare programmes, held by different ministries and agencies, to avoid overlaps and inefficiencies.

Finally, the key challenge is financing the social protection programmes.

There is a golden rule stated in the Loan (Local) Act 1959 for the federal budget where borrowings are only allowed to finance development expenditure.

In other words, the current balance is always in surplus to ensure operating expenditure is financed by the revenues generated by the federal government.

With the operating expenditure by the government nearly reaching the revenue received, Putrajaya should probably rethink the approach to achieving breadth first (more coverage for the population) and depth later (bigger amount allocation).

That is to at least emphasise on including more targeted people in the social protection system first, while the depth of the social protection system can be adjusted later depending on the financial situation of the federal government. – July 25, 2022.

* Nick Tan Beng Teong graduated with Bachelor of Economics at University of Malaya. A member of Agora Society, Tan believes in policy reforms in order to build a better nation.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.