Gov’t Working to Establish Unemployment Insurance in Jamaica

The Government is working on establishing unemployment insurance in the new financial year.

Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, said that in the first quarter of 2024/25, the Government expects to sign a US$20 million loan agreement with the World Bank to provide the Ministry of Labour and Social Security with the technical support to implement unemployment insurance in Jamaica.

Citing the experience of COVID-19 and the economic and social impact from the loss of jobs experienced by many Jamaicans, the Minister said the time has come for a funded scheme that provides temporary income support in the event of unemployment.

He was opening the 2024/25 budget debate on Tuesday (March 12) in the House of Representatives.

Dr. Clarke noted that a feasibility study on the scheme was conducted by the International Labour Organization (ILO) and consultations were held with the Jamaica Confederation of Trade Unions (JCTU), the Private Sector Organisation of Jamaica, and various other business groups representing employers, along with members from academia and civil society.

“Madam Speaker, I am happy to report that macro stability makes it feasible for Jamaica to have an unemployment insurance scheme that benefits Jamaican workers. Jamaica’s average income is such that many persons live pay check to pay check. Having a job is better than not having one, but if they lose that job, it can plunge that family into disarray,” the Minister noted.

Explaining how the scheme would work, Dr. Clarke said that it is likely that the employees who contribute to the National Insurance Scheme (NIS) would be automatically included in unemployment insurance.

“On loss of job, confirmed by employee and employer, the newly unemployed would become eligible to receive an unemployment benefit representing a particular percentage of their previous weekly income, up to a maximum threshold, and for a period of time,” he explained, while noting that Jamaica will have to work out its own parameters for this arrangement.

The Minister also made the point that usually, these costs are funded by employee and employer deductions, with the Government sometimes making an upfront fiscal contribution to capitalise the scheme and treat with the possibility of major unemployment materialising before the scheme has amassed sufficient funds from contributions.

“The feasibility study indicates that it could cost as little as 0.8 per cent of salary, or as much as 1.5 per cent of salary, with capital contribution from the Government of a few billion dollars for this benefit to be provided, depending on parameters selected,” he told the House.

Once implemented, Jamaica would join countries like Barbados, the Bahamas and others in the region with such a structure for social stability.

For Jamaica, however, unemployment insurance would become the fifth statutory deduction collected from employees, and as such, Dr. Clarke said that the Government is looking at administratively consolidating these deductions into a single deduction, with the distribution to each entity of its share, enshrined in, and protected by, legislation.

“The major advantage of consolidation, in the context of introducing a new unemployment insurance benefit, is that initial calculations show that we could potentially introduce this benefit without increasing the headline statutory deduction rate, and with no additional cost for up to 95 per cent of persons enrolled in the National Insurance Scheme,” the Minister said.