Thu | Dec 9, 2021

Editorial | Tackling Jamaica’s pension crisis

Published:Wednesday | March 10, 2021 | 12:11 AM

Annie Ivey’s story, published by this newspaper on Monday, is a call to action.

Ms Ivey is 78. She is a market vendor. She works every day. She’ll continue until she cannot go anymore. Ms Ivey won’t stop because she cannot afford to. She has no pension.

Annie Ivey is not unique. She is among the more than 60 per cent of working Jamaicans who have no form of pension. And even this bit of statistic is misleading. It understates the island’s pension crisis. For, based on the island’s employed labour force of over 1.115 million, far more people than the estimated 470,000 should be on the books of the National Insurance Scheme (NIS) as contributors.

The situation, this newspaper believes, demands an injection of energy into, and a widening of Jamaica’s long and too often meandering debate on pension reform. At the same time, the Government should engage a massive mobilisation of Jamaicans to sign up to the NIS. It is an area, if he accepts the challenge, in which the labour and social security minister, Karl Samuda, could leave a lasting mark on national life.

Ms Ivey and the other elderly workers featured in Monday’s International Women’s Day report were highlighted in the context of the global disparity between men and women with respect to pension security. Women often work in the home, for which they are paid nothing.

Homemakers/caregivers are not covered by pension schemes. Yet, women tend to live longer than men, facing all the consequences of old age, with little economic support, years after their partners have died.

There are no immediately available hard data on these disparities in Jamaica. But the anecdotal information, some say, suggests that despite a greater participation rate of men in the labour force, and higher unemployment among women, females seem more likely to have jobs and work in firms with formal pension schemes. They are more likely to be better educated than men. Rigorous analysis is required of this issue.

Whatever the gender balance, however, the problem is real.

Indeed, Jamaicans registered with the NIS, to which workers and their employers share a six per cent payroll tax, represent the largest group of people covered by any form of pension arrangement. Yet, the 470,000 active contributors – around 24 per cent of whom receive benefits – account for only 36 per cent of the island’s labour force, and 41 per cent of those who have jobs.

Apart from the NIS, perhaps 100,000 or so public-sector workers are also covered by pension schemes. They represent only nine per cent of the employed labour force. Another 133,000 private-sector employees, 11.5 per cent of people with jobs, are also part of pension schemes.

Put differently, only around a fifth of all workers, counting the public and private sectors, are currently in some kind of pension scheme. These employees also contribute to the NIS, representing approximately half of its participants.

However, the NIS, which, by law, is a compulsory scheme - when measured against the employed labour force - should have at least 1.15 million Jamaicans as active contributors, 60 per cent more than the scheme’s current numbers. There are several good reasons why there should be a drive to enhance its enrolment. One is Paulette Muir, 65, another of the women featured in Monday’s story. She, like Ms Ivey, is a market vendor. She, too, has no pension to look forward to.

“Back in those days (when she was young), I wasn’t thinking about getting older, and I didn’t know about NIS, either,” she said.

Many people, especially the poor and those in the informal economy, still do not know about the NIS. Or, they know of it in only vague terms. That should change. For even though the scheme, on average, replaces less than 15 per cent of people’s employment incomes, for many it is the only financial support they will have in old age.

However, the NIS is not in good financial health. It needs new, and younger, contributors to be sustainable. In 2019, when the Government implemented an uptick in the rate of contribution, and hiked the amount of income on which the tax was paid, there was a dire warning that the fund could begin to have negative cash flow in a decade. It could go broke by 2035. The situation may have improved, but we have not been told. Whatever is the case, the NIS is not out of the woods.

It is important that the scheme survives. A robust recruitment of members must be part of the effort. At the same time, we should be talking about, and implementing, other initiatives to financially support Jamaicans in their old age.