The Covid-19 pandemic highlights Malaysia’s social protection challenges in terms of coverage gaps and inadequate benefits. This blog post discusses the need for inclusive social protection systems and advocates for a life cycle approach to ensure that the entire population can overcome social and economic risks throughout their lifetimes. To build back stronger, paradigm shifts are needed to achieve universal coverage for social protection and ensure basic human rights for all, writes Hawati Abdul Hamid
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The Covid-19 pandemic serves as a stark reminder that Malaysia’s social protection system still suffers from problems of coverage gaps and inadequate benefits. The standard approach to many of the challenges the country faces today is to resort to “short term relief programmes” with a heavy emphasis on “targeting” rather than persistently striving to build a system that can make everyone resilient.
The dedication to ending poverty eradication may have relegated many key social protection schemes to welfare aid programmes, targeting those deemed “deserving” such as individuals living below the poverty line and households in the bottom 40% in the income distribution (B40). However, identifying those in need is difficult and policymakers often rely on arbitrary eligibility criteria like the B40 income cut off. Given the complexity of accurate targeting, some vulnerable people who are not “officially poor” by the national standard are bound to be left no their own devices.
On the other hand, social insurance schemes operated by key social security institutions like the Employees Provident Fund (EPF) and the Social Security Organisation (SOCSO) have demonstrated great agility and speed in dispensing relief, but their reach continues to be limited to formal-sector workers who are making contributions together with their employers. Often neglected are the “missing middle”, who are neither “rich” nor “poor”. Largely in the informal economy, they cannot access social insurance benefits schemes due to lack of contributions, yet they are often left behind for means-tested tax-funded social assistance. While the inadequacy of retirement savings has been a long-standing issue, Covid-19 withdrawal schemes have worsened the situation further. The missing middle issue is manifested in most of the schemes across the life cycle groups from children, working age and old age—a phenomenon that has not been addressed under the current approach.
From the macro perspective, the country also faces economic, demographic, and social challenges. Malaysia has been experiencing lacklustre economic growth and has yet to graduate from the middle-income status it has held since 1994. At the same time, the country is getting old before getting rich, while Malaysians are living longer, but not necessarily healthier. Malaysian life expectancy has increased from 60 years to 76 years between 1960 and 2020, yet healthy life expectancy (HALE) has only marginally improved from 62.8 years in 1990 to 65.5 years in 2019. The high prevalence of non-communicable diseases, coupled with a rapidly ageing population, means that the demand for healthcare services will only continue to rise, putting pressure on the nation’s healthcare.
Concomitantly, the economy is also not immune to challenges brought about by globalisation, automation, informalisation of jobs, and climate change. The current position makes the goal of social protection that prevents everyone from falling through the cracks both challenging and pressing. Therefore, it is imperative to advance the protection reforms more than ever, as continuing with the status quo will only exacerbate inequality.
Building back stronger
In doing so, several paradigm shifts are required to build back stronger. While Malaysia has come a long way in poverty eradication, it has yet to build its own nationally adapted social protection floors that guarantee a basic level of social security for all. Building back stronger means going back to this fundamental premise of providing essential social services and security to everyone. This involves reviving the commitment to ensuring that everyone has access to decent levels of support against risks they face at every stage of life—during childhood, when they are out of work, injured and sick; and when they are old. These lifecycle risks are not new; they have been encapsulated in the nine branches of Social Protection under the ILO Convention 102, which has existed since 1952. The normative framework for the minimum standard in social protection is rooted in the established Universal Declaration of Human Rights dating back to 1948. Realising human rights requires the guarantee of effective social protection against well-documented shocks throughout one’s life. Top of Form
Essentially the protection from cradle to grave was what Malaysia’s second Prime Minister, Tun Razak, envisioned providing for everyone when he put forward a proposal to establish the Social Security Organisation (SOCSO) half a century ago. However, there has been slow progress in fulfilling his vision of building a long-lasting system that covers all.
Another necessary paradigm shift is to move from viewing social protection as a gesture of charity to an act of justice that safeguards everyone. This recognition is based on the fact that everyone is exposed to unpredictable shocks, which can potentially lead them into poverty. Poverty is not a static condition; rather, everyone is susceptible to the risk of falling into poverty.
Incremental steps are needed to address the issue of limited legal coverage by amending existing provisions. Nevertheless, extending the legal coverage alone does not guarantee effective coverage. To bridge the coverage gap and enhance benefit levels, a universal approach is necessary where all individuals in Malaysia are included in the system regardless of whether they are rich or poor. When everyone stands to benefit from the system, everyone also stands to lose. Universal provisions can sustain societal pressure to keep the schemes running. They also require sustainable financial and legal foundations that are much tougher to repeal than social assistance programmes that tend to be prone to shifting political priorities.
A coherent system that ensures long-term sustainability can be achieved through a well-coordinated mix of funding by employers, employees and the government (from tax revenue) within an integrated social protection framework. Instead of dispensing reliefs separately under social assistance programmes, greater government commitment to the social security platform is a more effective strategy in extending protection to all.
As observed during the Covid-19 pandemic, the lack of social protection traps individuals in a vicious cycle of vulnerability and social exclusion. This not only hampers individual welfare but also impedes the country’s economic and social development. Extending social protection coverage to those in the informal economy not only enables their access to vital sources of support but also facilitates their transition to the formal economy, which subsequently bring about positive economic growth and government revenue. Additionally, enterprises also stand to benefit as research suggests that better social protection improves labour productivity and competitiveness.
Furthermore, the approach to social protection has to be forward-looking—in preventing poverty and addressing vulnerability—and not reactive. The notion of resilience will remain elusive without the capacity to protect people against personal and systemic shocks. To build that “resilience” requires building an enduring “system” and not “short term relief programmes”.
Ideally, targeted social assistance schemes should be an add-on to the universal social protection floor ecosystem and extend beyond the basic needs that rest within the realm of the government. The curation of targeted programmes then would require a more immersive community engagement that could draw on the strengths of the third or social sector like community organisations, charities, and social enterprises. Organisations or charities that are organised by certain focus groups or localities like single mothers or disadvantaged students in the urban areas might be in a better position to develop much more targeted assistance for specific vulnerabilities given their closer connection with communities. The advantage of working on the ground also lends opportunities for these groups to help ensure those who left behind to be integrated into the mainstream national social protection system.
Conclusion
The recent health crisis experience provides four key lessons. One, a crisis presents an opportunity to challenge and change the prevailing status quo. Two, the current state of affairs could be both the symptom and the cause of a (prolonged) crisis. Three, breaking the vicious cycle of poverty requires challenging the pre-existing societal machinery. Four, social protection must be viewed as an investment in the people and integrated into the national long-term development plan. However, the plan is not an end goal in itself, but a means to ensure that people, regardless of their social standing, have access to basic amenities, enabling them to lead dignified lives. True to the vision of the 1970 New Economic Policy that was intended to eradicate poverty irrespective of race, what is needed is to continue to uphold this promise by creating an inclusive social protection system.
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*Banner photo by mkjr_ on Unsplash
*This blog is based on a presentation given on 1 June 2023 in the ‘Socio-Economic Futures’ session at the Malaysia Futures Forum, jointly organised by the Saw Swee Hock Southeast Asia Centre and Khazanah Research Institute.
*The views expressed in the blog are those of the authors alone. They do not reflect the position of the Saw Swee Hock Southeast Asia Centre, nor that of the London School of Economics and Political Science.
