ON THE LEFT: NIS doing what it’s supposed to do
We have to understand what our objectives are. We can’t say we are doing well or we are not doing well unless we understand what we are trying to achieve. The purpose of social security was benefits to people who are working and for some reason can’t work anymore, and it hopefully combats poverty and avoids inequality.
It’s a first layer and the goal is to leave room for the private sector as a second layer so that you can live comfortably with two sources of income in old age.
In social security there are some similarities with private insurance but there are some differences. At the end of the day we do pool risks, there are defined benefits, the rules are written in stone and yes they can be changed but they are written and clear, coverage is clear, the rules for qualifying for benefits is clear just as they are in an insurance policy or pension plan. And for the most part there is a specific premium that must be paid to get your benefit.
The key difference is equity versus adequacy. On the social side you want to ensure that at the end of the day the majority of the people are able to get a benefit and can stay in a basic standard of living, not making the wealthy person wealthier and the poor person poorer. So it’s not a matter of equity on the financial side, it’s social adequacy.
An employee goes to work every day but they are assured that if they get sick, if they get injured, if they die or if they get old there is something coming to them and to their family if they die. And that’s protection for the workers, it’s good for them, it’s good for their employers, and it’s good for the economy. In Barbados you see in the last four or five years unemployment has been massive and the fund has kicked in and allowed the economy to keep going better than it would have been had their been no benefit for those thousands who were unemployed on a long term basis. And so we have coverage on the short term insurance side for everybody.
Other than Barbados throughout the region there is very very low coverage for private sector workers in terms of a pension plan with their employer so the NIS fills that gap. Everybody who is working is covered by this pension plan, the rules are clear wherever within the country or they migrate and come back home they are still covered and that pension adds up over time and is fully portable wherever they go. Over 70 per cent of the elderly in these populations have an NIS secured monthly pension to look forward to.
Forty five years ago in Jamaica and then later in Barbados, governments came and made a promise to these people that when it’s your turn to get you are going to get and since then to today these promises have been met quite easily, quite well and quite affordably. There is no doubt that these schemes have served our countries well.
Derek Osborne is chief actuary of Horizonow Consultants Limited. He conducted the last actuarial review of Barbados’ National Insurance Scheme and was speaking at the Caribbean Acturarial Association’s 24th annual conference at Hilton Barbados.