Editorial | NIS reprieve needs more

According to the labour minister, Karl Samuda, the actuaries now say that Jamaica’s National Insurance Scheme (NIS) won’t, as was previously projected, go bust by 2035. That would be a mere dozen years from now.

Based on the latest actuarial review for the three-year period up to 2021, the scheme has extended its lease on life by 15 years. So if nothing else happens, it will now go broke by 2050.

The report, Mr Samuda told Parliament last week, is being reviewed by the Government, which should lead to the administration’s policy responses. However, this matter, as is the case with all actuarial reviews of the NIS, is too important and urgent not to be immediately available for analysis and debate by all stakeholders, who may have solutions to offer.

Therefore, Mr Samuda, or the finance minister, Nigel Clarke, whichever of them has direct oversight of the National Insurance Fund (NIF), should cause the review to be immediately made public, including being formally tabled in Parliament and sent to the Public Accounts Committee (PAC) and/or the Public Administration and Appropriations Committee (PAAC) for hearings.

But apart from any fiscal adjustments that may flow directly from the actuaries’ findings, the administration should pursue two other initiatives – previously suggested by this newspaper – that would help to further shore up the NIS, add flexibility to the labour market, and contribute to making Jamaica an easier place to do business. One of these merely requires administrative action, and, in essence, would be an extension of Minister Samuda’s exhortation that workers register with the NIS.

ISN’T IN QUESTION

The relevance of the NIS isn’t in question in a country where only around a fifth of the working population has pensions. More than half of those are covered by the NIS, from which they can expect, by our estimate, no more than 15 per cent of their pre-retirement incomes.

An earlier actuarial report, for the five years up to 2016, had warned that the NIS was heading for bust because the National Insurance Fund (NIF), from which it meets its obligations, was heading to a point of paying out more than it takes in through contributions and investment income.

Part of the reason for this is that while greying Jamaicans were increasing faster than most other segments of the population, the NIS (its enrolment is around half a million) wasn’t bringing in sufficient new contributors to pay for the rising number of retirees. All Jamaicans over age 18 are obligated to register and contribute to the scheme.

Mr Samuda said that there has recently been an increase in enrolment although the numbers weren’t reported. However, the NIS’s extended life is primarily the result of the one per cent increase in contributions – to six per cent of income – that was imposed in two tranches since 2019, plus last year’s rise, from J$3 million to J$5 million, the maximum earnings on which contributions are made.

“The actuaries reported that the measures implemented have extended the life of the NIS by some 15 years,” Mr Samuda told Parliament. “The actuaries have attributed this to better-than-expected investment performance, significant increases in contributions, and a much larger number of contributors than in 2016.”

ENROLMENT

While the increase in the number of contributors is welcomed, enrolment remains far from universal. The informality of large swathes of the Jamaican economy doesn’t make it easy to become an NIS contributor. Moreover, young people don’t readily contemplate the issues of old age nor are they motivated to voluntarily participate in schemes like the NIS. That is why the labour ministry should aggressively take the NIS to people’s workplaces, including informal ones, to sign them up on the spot. The Government should explore innovative ways to make it easy for self-employed and informally employed workers to make NIS contributions. In other words, it should be as easy for NIS self-employed and informally employed contributors to make payments to their uniquely numbered accounts as paying for data on their mobile devices.

These adjustments to the NIS should also be part of a larger reform of the labour market that includes the repeal of the redundancy law and its replacement with an unemployment insurance scheme, to which the Government in the past signalled it was committed. It has been slow to act. There have been no recent updates on the status of the studies that were to be done.

Redundancies often take place when firms are in trouble and need to restructure. Their problems tend to be exacerbated by hefty redundancy bills. The unemployment insurance scheme can help to mitigate this problem, being of benefit to firms yet fair to workers.