Stronger social protection reform needed to prepare workers for crises

July 16, 2021 - 08:28

With the second COVID-19 support package from Government being disbursed for a wide range of recipient groups including informal workers, vendors like Nguyễn Thị Chiến is counting the days for the money to arrive. For her, the relief can't come soon enough.


A vendor walks in an empty street of Hà Nội after the city started to impose stricter social distancing measures amid a surge in COVID-19 cases on Tuesday. — VNS Photos Vân Nguyễn 

Vân Nguyễn 

HÀ NỘI — With the second COVID-19 support package from Government being disbursed for a wide range of recipient groups including informal workers, vendors like Nguyễn Thị Chiến is counting the days for the money to arrive.

For her, the relief can't come soon enough.

Chiến, a resident of Nam Định Province who moved to Hà Nội in 2000s, has collected used plastics and paper to resell for more than 10 years.

Travelling around the city for up to eight hours a day pushing her old bicycle in all weather conditions, the single mother could still manage to support her family of three with a monthly income of VNĐ4 million (US$170). But things have been much tougher since the pandemic hit.

Informal workers like Chiến, who work for themselves and have no contract are not eligible for social protection and suffer hard because of COVID-19.

“When the social distancing measures were made stricter and restaurants close, I come home earning nothing,” she said, adding that her main collecting places include restaurants where she can find used plastics and offices where used paper stuff is given free or sold.

Less income made her more creative in cutting spending. 

As her only daughter, a university student, has shifted to online classes due to COVID-19, she sent her back to the hometown with her grandmother to save money.

“I save money on whatever I can, whether it’s food or accommodation,” the 49-year-old said, adding that going vegetarian turns out to have double benefits, helping her skip meats and saving money in times of crisis.

Though economic growth picked up to some extent in the second half of last year, and more strongly in the first half of 2021, it has not been sufficient to fill the job creation gap. As a result, employment quality has been deteriorating, according to the International Labour Organization (ILO) in Việt Nam.

Since the beginning of 2020, the informal employment rate has been on an upward trend both in manufacturing and in market services, the organisation said.

According to the latest report by the General Statistics Office, the number of informally employed workers in the country in the second quarter of 2021 was 20.9 million, up 1.4 million over the same period last year.

Valentina Barcucci, ILO in Việt Nam’s Labour Economist and Officer in Charge told Việt Nam News: “It can be easy to see how informal workers will be significantly affected by the current wave, and possibly, even more in the second half of June and this month, as the virus spreads and businesses and services are closed in large affected areas.”

Informal workers are not just limited to street vendors, they also include employees of businesses, who have an agreement with an employer but do not exist in the employer’s books, she said.

“Employers experiencing economic hardship might have to resort to retaining a worker without paying social protection contributions, for example,” the economist said.

With the drop in earnings, no support sources and no savings at all, Chiến had to resort to borrowing money from her friends, relatives and fellow workers.

Barcucci added: “In a way, cash transfers can play a double role of supporting families maintain their consumption levels through a crisis, but at the same time mitigate the drop in demand for goods and services faced by companies.

“More than a cost, such a package can be an investment in stabilising the economy, keeping families away from poverty, and thus leaving no one behind.”

Việt Nam has approved a package worth VNĐ26 trillion ($1.13 billion) for labourers and businesses affected by the pandemic, in which informal workers will be a beneficiary.

One of the updates in the new package compared to the previous one is local authorities will directly allocate funds to informal workers.

Cities and provinces will set up their own categories to recognise this group of workers, who will receive at least VNĐ1.5 million each. 

In April last year, the Government approved the first support package worth VNĐ62 trillion (US$2.7 billion).

According to the Ministry of Labour, Invalids and Social Affairs, by May this year, the package had disbursed just VNĐ13.1 trillion, equivalent to about 22 per cent

The number of beneficiaries receiving cash from this package was nearly 13.2 million.

According to an assessment from labour experts, groups of policy beneficiaries and poor households were paid quickly and on time due to the available lists and standard data systems while for the remaining target groups, especially workers without labour contracts and household businesses, the support was slow due to many administrative procedures and regulations on conditions and standards to receive the assistance.

Delivery and implementation of the second package is a great challenge that needs to be addressed to ensure the support is delivered timely to those desperate for cash assistance like Chiến.

Nguyễn Thị Chiến, 49, has seen her day-by-day basic earning drop and has to resort to borrowing cash to survive.

Barcucci said: ​“Ideally a relief package should identify those that need government support the most, and be tailored and delivered to them. However, this is a very complicated, time-consuming and resource-heavy task, particularly in a country with high levels of informality.

“There will always be a trade-off between the fairness of support provided, the speed of implementation, and the fiscal space needed for each different COVID-19 support package.

“It is up to the State to discuss and decide where optimal balance lies between these different dimensions.” 

Stronger social protection reform needed  

After the first round of support was offered, there were a number of allocation problems that arose.

Barcucci added: “From the experiences with the first package, there are clear challenges of the existing social protection system which should be addressed.”

They include the “fragmentation, limited coverage and adequacy” of the social protection schemes that lead to the “limited ability” of the social protection system to act as an automatic stabiliser in case of shocks.

The 'missing middle' is also a challenge that needs to be solved as they are mostly workers in informal economy who are in need of immediate support but are not covered by any existing social protection mechanisms, she said.

Besides, the current emergency support mechanisms are not prepared to respond to large scale co-variant shocks and are neither linked to the regular social assistance schemes nor to social insurance, thereby they fail to serve as an automatic stabiliser in a shock-resilient social protection system, she said.

“The Government should take into account the lessons learned from the limitations of the previous package, to accelerate the reforming of social protection system towards a more shock-responsive social protection system that will allow to protect affected people in the COVID-19 and future crises.”

She said there is no single winning approach to the informal economy that a country can learn from others and apply directly.

“Rather, it is necessary to understand in detail the drivers and characteristics of informality in each specific context, before moving on with a response,” she added.

Chiến doesn't not know if, or when, she will be given any government assistance. She plans to contact her local authorities to see if she is eligible. 

In the meantime, she continues to take inspiration in life from her daughter, a fourth year university student who will graduate soon. When that happens she will no longer have to worry about paying the huge tuition fee. 

“I hope she can find a good job after graduation and have a better life than me,” the single mother said. — VNS