Elective social insurance systems in developing East and South-East Asian countries

Expanding social protection coverage is a key policy issue in many developing countries and social insurance schemes form one important mechanism for achieving this. Normally social insurance systems are described as ‘mandatory’ or, alternatively, as ‘voluntary’ i.e whether the targeted workers should be obliged to join or should have a choice as to joining the scheme or not. In the case of many developing countries, participation in social insurance is, in theory, mandatory for those within the scope of the relevant legislation as participation is required by law and non-participation is subject to legal penalties. However, in many such countries, there is a limited expectation that the law will be enforced and no expectation that all employers and employees subject to the law will actually be covered. Such systems might better be called ‘elective’ as they depend on the decision (‘election’) of various key stakeholders to participate or to require participation. Thus, the government must decide to enforce participation; relevant ministries and agencies must have a political mandate (in addition to the formal legal mandate) to enforce the law and the capacity to do so; and employers and employees must also decide to participate and to pay contributions. In order to support enforcement of the law in such elective systems, it is necessary to engage with all these different key stakeholders, i.e. government, enforcement agencies, employers and employees (and of course employer and employee representative organisations). This paper suggests that while many existing studies have correctly identified factors relation to non-enforcement (or partial enforcement) of mandatory coverage, they have incorrectly assumed that such lack of implementation is due to a failure to enforce rather than a decision not do so. Therefore, measures to improve enforcement have focussed on ‘technical’ issues such as capacity and information. While these are important factors, it is argued that the political economy reasons why states and employers elect not to enforce the law needs to be recognised and such enforcement measures need to be set in the appropriate policy context.