Securing Social Security

November 29, 2012

The Social Security System (SSS) is intending to increase its premiums in 2013. The Employers Confederation of the Philippines (ECOP) and the Federation Free Workers (FFW) and other labor centers in the country expressed their early objections to the proposal.  

According to the reports, the SSS is planning to increase the monthly salary credit by 0.6 percent, from 10.4 percent to 11 percent. It justifies the proposal with the need to increase and improve the benefits of the System to its members. Well, there is no argument against this need to increase its benefits and improve its services to the members. We could only wonder what increase and improvement is the SSS planning to make. We could only that the members of the System hope that it will lead to the increase in pensions and other benefits due them. Meanwhile, nobody knows how the System will improve its services, except that all claimants wish that there will be shorter processing time, approachable personnel and comfortable facilities when the proposal is implemented.

ECOP is complaining about the intended increase. It fears that employers shall shoulder everything eventually. It claims that the increase in the employers’ shares of the contributions will lead to higher production costs. If this will happen, producers have to increase the prices of commodities also.

The proposal also met the objections of the organized labor, such as the FFW. The additional premiums will increase the burden of the workers, especially of those who are living a hand-to-mouth existence. Despite these objections from both ends of the spectrum, the SSS is unlikely to retract its proposal. It is convinced that the increase is necessary to improve the System. As such, an impasse is likely to happen soon.

Of course, there is some merit to the claim of the SSS. Without a sustained and increased premiums from both employers and employees, the SSS cannot implement any plan to give better benefits and services to its members. Otherwise, the System shall remain where it is now—seemingly efficient yet unreliable in times of needs.

So, if not from the increased premiums, then, where should the SSS get the funds for these benefits? ECOP suggested a more reliable solution: sound investment management and prudent spending (see Interaksyon 5, October 2, 2012).  On the other hand, the workers could not give any suggestion which will not increase the burdens that they are carrying.

Truly, the workers could not advance any convenient alternative to the proposal of the SSS. Theoretically, they are the owners of the System. They are the bosses that the System is serving. The staff and personnel of the SSS are their employees, though they do not exercise the traditional prerogatives of an employer, i.e., the power of selection, the payment of wages, the discipline and control of its staff and personnel. Rhetorically, they are to be treated as kings and queens by the System. Parenthetically, they are obliged to secure the sustainability of the System as its owners. Hence, they do not have any right to complain against this proposal since they are the ones who will benefit thereby. Inspite of this, they do complain a lot; their perceptions of what is happening differ sharply from what the theory is supposed to be expounding.

           

Republic Act 8282, or the Social Security Act of 1997, expresses the policy of the State to establish, develop, promote and perfect a sound and viable tax-exempt social security service suitable to the needs of the people throughout the Philippines which shall promote social justice and provide meaningful protection to members and their beneficiaries against the hazards of disability, sickness, maternity, old age, death, and other contingencies resulting in loss of income or financial burden (sec. 2).

The State guarantees that the System would afford protection to its members during the contingencies mentioned above. In reality, however, the government does nothing but secure the liquidity of the System. The government would not infuse any funds to the System on the assumption that the latter is, and should be, self-liquidating.  Accordingly, the benefits of the System are not supposed to be increased or improved without prior increase in the sources of funds. This is the reason why employers are ranting about the intended premium increases—they will be made to pay higher contributions since their counterpart is bigger than the shares of their workers.  

There are better ways of improving the System and increasing its benefits to the members. One is by letting taxes pay up for the System. If the government could bail out an ailing private company or pay up scandalous loans for deficient government projects, then, why could not the System enjoy the same privileges so that it may improve its benefits and services?

The System will be more sustainable and reliable if it is funded out of the income taxes of its members. The equation is simple: the more income taxes people pay, the better the System is. This sounds more equitable and fair for the taxpaying public. With this, people will feel that their government truly cares for them, especially in times of contingencies such as sickness, disability, old age and death. People will easily understand why they have to pay taxes. This will improve the proverbial justification about taxes, that is, taxes should be paid because they are the lifeblood of the government. With this new scheme, a new justification for the collection of taxes will be in place: taxes take care of you when you are sick, disabled, unemployed, and when you breathe no more—taxes would take care of those you’d leave behind. Pay your taxes, secure the System.