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The " Unemployment Insurance Scheme" Betrayal !

By Dr. Jeyakumar

psm with wording logo
The PSM is appalled to learn through a news item in page 6 of the STAR on 12th June 2012  quoting Datuk Seri Dr Chua Soi Lek as stating that the Prime Minister has directed the Human Resources Minister Datuk Seri Dr Subramaniam to shelve the “Unemployment Insurance Scheme”. Apparently this directive was given during a National Economic Council meeting on 11thJune 2012.

Several parties including the PSM, JERIT and the MTUC have been pushing for a Retrenchment Fund ever since the recession of 1997 – 1998. The government has  said that they are seriously studying the issue, and more than a year ago, the government claimed it had referred the matter to the ILO for advice. Now after dragging its feet on this matter for 15 years, the BN government has decided to shelve the idea!

The PSM feels that there is an urgent need to set up a Retrenchment Fund now. The global economy is facing serious problems. The sovereign debt problem is not confined only to Greece or Spain. Most of the developed countries including Italy, Britain and Japan have huge government debts. There is a high probability of Greek default and this will add to the difficulties that other EU nations are facing in raising funds from the financial markets. Europe is already sliding into recession, and a Greek default will accelerate the process.

Europe contributes 26% of global GDP. Recession in Europe will depress the economy of Asian economies as well, and there is a likelihood that as early as the beginning of 2013, certain firms in Malaysia might lay off workers. The high level of indebtedness of European governments has constrained the capacity of these governments to use the Keynesian strategy of countercyclic spending to limit the seriousness of such a recession. Therefore it is quite likely that the recession that might unfold next year may be deeper and more prolonged than usual.

We know from previous experience, about 25%  workers retrenched during a recession will not receive even the minimum compensation as specified in the Employment Act (20 days wages for each year of service), because their employers claim bankruptcy. At this point in time there is no protection at all for the workers of companies closing because of cash flow problems.

The PSM urges the government to set up an emergency retrenchment fund to cover workers who are laid off by companies claiming bankruptcy. This should be set up with funds from the Federal Government as devising a fund based on contribution from employers has been taking far too long. So, to cover the possibility of recession in the near future, the government should set up this emergency recession fund as a temporary measure, as soon as possible.

After dragging its feet for 15 years and failing to come up with a proper sustainable fund, the least that the government can do is to set up a temporary retrenchment fund to provide some protection for Malaysian workers in case we are hit by a recession next year.

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