Communist Review - Ensuring social security has been identified by the State and the Communist Party of Vietnam as an important task of the country's renovation, demonstrating the good essence of the regime. Over the years, Vietnam's social security net has contributed to ensuring social security and building a people-oriented economy in Vietnam. In the coming time, Vietnam will promote the achieved results, overcome limitations, continue to improve the social security net towards an economy for the people.

Social safety net and economy for people

According to Oxfam, the economy must be designed and built to meet the different needs of everyone, and to protect our planet. It is an economy for people with the goal of equality, justice and sustainability; social progress benefits everyone without destroying the environment; respecting paid and unpaid contributions to the economy. In that economy for people, governments must develop policies with the aim of fairness and equity for everyone, including women and children. The economy for people must first ensure equality of opportunities and income and take care of the environment and social values (1).

One of the requirements of the economy for people is to ensure the right to social security with a minimum income and to ensure access to basic social services for everyone. In each person’s life, it is not always possible to have a stable source of income to meet living needs. How to ensure life, meet living needs, at least minimally, when people are old, weak or at risks? The social safety net was created to ensure income for those who unfortunately lose or decrease their income due to health, old age; unemployment or other reasons.

According to the International Labor Organization (ILO), “Social security is the protection that society provides to individuals and households in order to ensure access to health and income guarantee, especially in case of old age, unemployment, sickness, disability, labor accident, maternity or lack of caregivers” (2). To ensure the satisfaction of different needs and subjects of social security, the social security system is organized into a security net. Typically, a social security net includes:

Firstly, the job settlement support system.

Second, the social insurance system.

Third, the social support system.

Fourth, the basic social service guarantee system.

The components of the social security net are in relations and interact with each other towards performing the function of the social security net, which is to prevent risks, protect people and promote evolution. Thus, the social security net is a system that aims at building an economy for people through income guarantee and access to basic social services for all, particularly focusing on supporting groups of disadvantaged people in society. They are the elderly, the disabled, women, children and the poor. Building a social safety net that covers the entire population ensures everyone can access and enjoy social security is a requirement of the economy for people.

Results of construction and implementation of social security net in Vietnam

Resolution No. 15-NQ/TW dated June 1, 2012, of the 5^th Plenum of the 6^th Central Committee “On some social policy issues for the period 2012 – 2020”, set a determination to develop Vietnam’s social security system that is consistent with a middle-income country and with international standards, ensuring increasingly better basic human rights. Then, at the 7^th Plenum of the 12^th Central Committee, the Communist Party of Vietnam clarified the orientation and solutions for reforming social insurance policies in Resolution No. 28-NQ/TW, dated May 23, 2018 “On social insurance policy reform”. The resolution points out reforms including: 1- Building a multi-layer insurance system, including three tiers: The first tier is a social retirement allowance for the elderly who do not have a pension or a monthly social insurance. The second one is basic social insurance, which includes compulsory and voluntary social insurance based on contributions of employees and employers. The third one is supplementary pension insurance according to market principles so that employees and employers have more options to contribute in order to enjoy a higher pension;

2- Adjusting the minimum period of participation in social insurance to enjoy retirement in a flexible way, adjusting the pension calculation based on the principle of contribution - benefit, fairness, equality, sharing and sustainability. This consists of expanding the subjects participating in compulsory social insurance; strengthening linkages and support between social insurance policies as well as policy flexibility to achieve the goal of expanding coverage; increasing the number of workers participating in social insurance in the informal sector; amending regulations on premium rates and payment bases to achieve the goal of expanding social insurance coverage; 3- Reforming in formulating and organizing the implementation of policies to strengthen confidence and increase the level of satisfaction of participants in the social insurance system; 4- Implementing the adjustment to increase the retirement age according to the roadmap. This includes overcoming the unreasonableness of the pension insurance regime in the direction of flexible eligibility conditions, stricter regulations on enjoying the lump-sum social insurance regime and increasing the actual average retirement age of employees; adjusting the accumulation rate to reach the maximum pension benefiting rate in line with international practices. Adjustment of pension is relatively independent in relation to the salary of working people, changing the way of adjusting pension towards sharing; 5- Diversifying the investment portfolio, structuring the investment of the Social Insurance Fund according to the principles of safety, sustainability and efficiency. Concretizing the guidelines and policies of the CPV, the Socialist Republic of Vietnam has built a legal system and promulgated many mechanisms and policies to better ensure social security for people. There are general laws and policies on social security as well as separate laws and policies for each pillar and specific social security content. On that basis, the State of Vietnam has determined that Vietnam’s social security net consists of four main pillars: Employment, social insurance, social assistance and basic social services.

From the perspective of subjects covered and the level of social security beneficiaries, Vietnam's current social safety net is multi-layered, which is similar in the model to the ILO’s social safety floor. Accordingly, at the first level, the State of Vietnam ensures the minimum security for the people through social subsidies, poverty reduction and the provision of basic social services. Vietnam’s welfare model aims to ensure people have a minimum living standard, pay a special attention to disadvantaged groups, such as children, the elderly, people with disabilities, women, the poor, and ethnic minority. However, due to economic development conditions and budgetary capacity, it remains difficult to ensure this minimum standard of living. With the policy of applying the multi-layered social insurance model with a social pension at the first tier introduced by the Communist Party of Vietnam in the Resolution of the 7^th Plenum of the 12^th Central Committee, Vietnam is aiming to ensure minimum social security for the elderly without pension or other income. At the second layer, social security is based on social insurance under the mechanism of payment - benefit, share. Employees who pay insurance premiums are at working age and entitled to social insurance regimes under circumstances of illness, diseases, collisions or maternity. When they are old, they are entitled to a pension and when they die, they are entitled to a survivorship regime. In addition, there is an additional social insurance on the third tier for those who want a higher level of coverage.

Over the past few years, Vietnam's social safety net has contributed to ensuring social security and building a people-oriented economy in Vietnam. Specifically:

Firstly, the social security net has contributed to support job security and reduce poverty. Hence, many workers have jobs to guarantee their livelihoods and incomes. The rate of poor households in Vietnam has decreased rapidly. The percentage of poor households applying the multidimensional poverty line decreased from 9.9% in 2016 to 4.8% in 2020.

Secondly, the coverage of social insurance increases, better ensuring the interests of the insured, especially improving the benefits for women giving birth, sick workers, and the unemployed. The number of people participating in social insurance increased from 13,056 million (in 2016) to 16,101 million (in 2020).

Thirdly, social assistance is concerned, contributing to partly ensuring the life of the elderly and disabled; people affected by natural disasters, ... Social assistance is gradually socialized, attracting the voluntary participation of the social community and businesses. Up to now, the social assistance policy has covered almost all targeted groups of all ages, 3% of the population and 100% of social protection beneficiaries are eligible for regular monthly social allowance; ensuring that 100% of people damaged by natural disasters, floods, starvation and epidemics receive unscheduled assistance in a timely manner.

Fourthly, the provision of basic social services is concerned and increasingly improved. Accesses to basic social services, such as education, health care, clean water, … are expanded. Thanks to these efforts, Vietnam is a country with a high human development index (HDI). Impressive results of poverty reduction in general and multidimensional poverty in particular have been achieved, including health insurance covering more than 80% of the population.

Some limitations of the current social security net in Vietnam need to be overcome in near future:

Firstly, the coverage of the social safety net is narrow in practice. Despite aiming to ensure social security for the entire population, Vietnam’s social security net only covers a part of the population in reality. This is reflected in the low scale of social insurance coverage, although it has improved in recent years. On the one hand, the social insurance coverage rate is just over 30% of the labor force. Unemployment insurance participation rate is also quite low; on the other hand, the number of people participating in voluntary social insurance accounts for only a very small percentage of the total number of employees participating in social insurance. After more than 10 years of implementing the voluntary social insurance policy (from 2008 up to now), only about 300,000 people have participated. Meanwhile, the informal sector currently has about 40 million workers.

Social allowances only cover a part of those who need support. The new social security mainly covers the poor, the disabled, the helpless, people who are unable to take care of themselves and the elderly over 80 years old; workers in the formal economic sector participating in social insurance. That means a large part of the workforce has not yet covered by social insurance and will not benefit from social insurance now and in the future after reaching retirement age. Moreover, a large proportion of elderly people in retirement age do not have social insurance and have not yet received social assistance. Social support for disabled people and helpless orphans is still limited. People at high risk of poverty and near poverty have not received much support.

Secondly, the current model of social security is potentially unsustainable in the context of aging population. If in 1996, there were 217 people paying social insurance premiums for a pensioner, by 2011, there were only 10 people paying for a pensioner. The difference between revenue and expenditure of social insurance funds is decreasing rapidly. With the current growth rate of social insurance spending, if the model is not redesigned, social insurance spending will soon exceed revenue, leading to the risk of shrinking the Social Insurance Fund. Meanwhile, the status of receiving one-time social insurance tends to increase among employees, especially workers in enterprises and industrial zones, affecting the insurance fund and increasing the number of employees who are not eligible for insurance when they reach retirement age. The financial source for the implementation of health insurance depends much on the state budget.

The demand for social security increases rapidly due to aging population and the increasing awareness of social security; the expansion of coverage of social subsidies, social pensions, etc. puts a great pressure on the state budget, which is the main source of finance for social assistance (and a part of social insurance).

Thirdly, the level of social security support in the current security model is still low and a part of the population has not been guaranteed a minimum standard of living. National budget spending on social security from the central budget accounts for a small proportion of gross domestic product (GDP) and total state budget expenditure. In the period 2012 - 2018, the proportion of spending on social security accounted for 2.44% of GDP and 8.66% of the total state budget expenditure.

The efficiency of using resources for social security is still low due to the small resources but investment is sparsely scattered in many programs and policies. The management and supervision of resource allocation and usage are still quite loose, leading to loss and waste, negatively affecting the effectiveness of policy implementation.

Orientation to complete the social safety net towards an economy for people in Vietnam

To further improve the social safety net in Vietnam towards an economy for people, it is necessary to build a multi-layered social security net based on the ILO social security floor model.

At the first tier is basic social security, which provides basic security, income security and basic living conditions for people. Social security is affirmed as a basic human right and the first layer in the social security model is responsible for ensuring the basic level of security for all people. In fact, the first layer ensures basic social security targeting vulnerable populations in terms of security, including children, the elderly, the disabled without income, the poor and the underemployed who are unable to self-ensure social security. Basic social security guarantees these people access to basic welfare services, even though they may not be able to contribute.

In the social safety net, the basic social safety net consists of 4 parts:

First of all, universal health care is through universal health insurance coverage. All people in the society are entitled to medical care and have health insurance to pay for when they are unfortunately sick or ill. For those who have jobs and income, they must pay compulsory health insurance and receive care through health insurance. For those without or lack of income, they are supported in whole or in part to buy health insurance from the Health Insurance Fund, subsidies from the state budget or from other funding sources.

Secondly, social security is for children. Children are considered as the national future and they are guaranteed the minimum security rights, such as adequate food and nutrition, clothing and access to basic social services, such as education and health care, housing, clean water, information. The minimum social security for children will mainly focus on the following objectives: To ensure that children do not go hungry, to ensure adequate nutrition, to reduce the rate of malnourished children; to ensure that children of sufficient age can go to school, towards the universalization of general education; children under 6 years of age receive free medical care in all cases; 100% of orphaned and helpless children are cared for at social protection facilities or raised by volunteer individuals and households. Orphans are provided with a fostering allowance from the Child Care Fund (sourced from the state budget and socialized sources).

Thirdly, social security for the elderly, the disabled, and people who are unable to work. The elderly and the disabled are a group of people who have no source of income due to their health conditions. Some elderly people are entitled to a pension due to contributions during their working time. For the elderly without a pension and the disabled, social security basically guarantees a minimum income for this group of people through a social pension or social allowance. Funding sources come from the social pension fund, support from the state budget and other sources of social mobilization and non-budget funding. Because of the very high proportion of elderly people without a pension in Vietnam (over 50%), it is not feasible to immediately provide social pensions or pension subsidies. Therefore, the orientation of reforming the welfare model in the coming time is to expand the area of ​​social assistance according to the roadmap, associated with the financial security of the state budget and mobilized sources from the society. Along with that, it is necessary to raise the retirement age, and at the same time encourage the elderly to do jobs that are suitable for their health to both have more income and exercise their health, enjoy a happy and useful life.

Fourthly, social security is for the poor, unemployed or underemployed. This is a group of people with working capacity but they have no job, underemployment or their jobs are not sufficient to secure their livelihood. Social security basically supports this group of people to help them secure an income while they are unemployed or underemployed through subsidies, such as unemployment subsidies, and at the same time this creates conditions for them to find a job, change jobs, have a job to earn income or be self-employed to secure a living. However, social security for this subject needs to be limited and strictly managed to avoid abuse and dependence. In fact, basic social security at the first tier mainly focuses on disadvantaged groups such as orphans, poor households, the elderly without pensions, disabled people, etc., who cannot be guaranteed their basic livelihoods. Indeed, the first layer of the social security model is aimed at those belonging to the employment support and poverty reduction system; social support system and basic social service delivery system.

For those who are able to work, the guarantee of income at risk or in retirement is based on social security in the second and third tiers.

In the second tier, social security is based on workers’ mandatory or voluntary contributions. The pillar of the second tier is the social insurance system based on the contributions of workers and employers. Accordingly, all employees and employers participate in paying social insurance premiums at the prescribed rate and are entitled to the social insurance regime in case of loss of income due to illness, disease, or loss of health, employment, maternity, or post-retirement. The level of social insurance benefits is partly based on the contribution level and partly on the principle of sharing among the subjects participating in social insurance. The payment-enjoyment regime ensures fairness between the public and private sectors, between compulsory social insurance and voluntary social insurance. In addition to the social insurance regime, this target group often has conditions to enjoy basic (and advanced) social services, job support in case of joblessness, and social assistance in case of unfortunate circumstances of getting risk.

If the second tier is based on compulsory and voluntary social security at a predetermined level, the third tier is enhanced social security for individuals and households who want to enjoy higher social security. Households and individuals can buy more social insurance to have a high pension when they get old, or they can buy additional health insurance for better care. They can also contribute to good social service in the form of socialization.

With this security net, all people are guaranteed minimum social security, everyone has guaranteed income and access to basic social services. This is the foundation for building an economy for people in Vietnam.

-----------------

(1) A. P. Butt, J. Remme, L. Rost, S. A. Koissy-Kpein “Exploring the need for gender-equitable fiscal policies for a human economy: Evidence from Uganda and Zimbabwe”, Oxfam Research Reports, 2018

(2) ILO: “Facts on Social Security”, ILO.org

(3) C. Arnold, T. Conway and M. Greenslade: “Cash transfers Literature Review”, London: Department for International Development, 2011

(4) Barrientos: “Social protection and poverty. Social Policy and Development Programme”, United Nations Research Institute for Social Development, Geneva, 2021, pp. 42

This article was published in the Communist Review No. 966 (May 2021)