State should carry part of the jobless claims burden

The Treasury has disclosed in its post-Covid recovery blueprint that it intends to create an Unemployment Insurance Fund (UIF) to give short-term relief to people who lost their jobs or are unable to work due to illness.

The plan will see employees contribute one per cent of their pay that will be matched by employers towards the fund that targets at least Sh23 billion annually on implementation.

This looks set to add to the cost of doing business in an economic setting where employers pay mandatory fees monthly to staff health and pension schemes.

While the plan to offer monthly stipend to laid-off workers is welcome, the government must bear part of the cost of paying jobless claims.

Government exists to enable businesses so that they can create and retain jobs. It cannot therefore leave it to workers and employers shoulder the heavy burden of supporting those who find themselves out of jobs.

It can, for instance, take up at least half of the monthly contributions and cut the contribution of workers and employers to below 0.5 percent of the pay.

Employers have in the past shunned pay raises and new hirings, citing the cost of sustaining workers entitled to compulsory social contributory schemes. Adding another scheme may dim prospects of new jobs.

Persistent job losses and fewer new hirings in the economy should also raise concerns about how sustainable the fund will be. Only through fewer job losses can the fund be spared from crushing. For instance, about 1.72 million workers lost jobs in three months to June when Kenya imposed stringent coronavirus containment measures. More job cuts look set to follow and recovery may take years.

This underlines the need to be proactive by creating the right environment for business as opposed to knee-jerk reactions.

And with about 70 percent of the workers engaged in the informal sector, the government must also find a way of cushioning such workers if they are to build an inclusive safety net for the country.