Social security system.pdf

Media

Part of Philippine Educator

extracted text: Social Security System· I CONSIDER it a distinct privileg·e and honor to be invited to speak before this grriup of civic and business leaders of our community on a subject matter which may bring about a· sharp change in our present social order and may play a decisive role in untieing the "Gordian knot" of the economic enigma which confronts our nation t0day. I am referring, ladies and gentlemen, to the implementation of the So·cial Security Act of the Philippines. To me, this is one of the most important social legislations ever enacted in this country. Its sign:ticance and meaning to the working masses of our people equals that only of our Independence Law of 1934 and of our Constitution. While those two organic laws have given our people the realization of our dreams to have political freedom and independence, this Social Security Act intends to give our labor force security and protection against economic misery and want. It is a concrete evidence and clear manifestation of the determination of our governm~nt to give subst~mce and realism to the social justice provision of our Constitution. Social security is a movement of the masses which has penetrated all prog1-essive countries in the world and is coming to the Philippines accelerated by the vigorous awakening of the masses for better livelihood and economic security after centuries of stagnancy. The decision of our .government to develop social security is tlie,·efore the proper step to meet this movement by an orderly, lawful, and systematic development without bringing about raciical and disastrous disturbance to our present social order of things. All progressive cvuntrie;; in the wo1·l<l have developed social security much ahead of the Philippines, and records will show that none of said countries t:ver backed out o·f it. The Social Security Act envisions a gradual development of a system which shall be suitable to the needs of the people throughout the Philippines, and shall provide protection against the hazards of disability, sickness, old age and death, and unemployment in the future. This development is a collective effort and responsibility of society-that is, all elements and forces that bring about the political and economic stability of the community should share a hand in this effort. The individual cannot by himself ·alone face the hazards of life brought about by the growing complexities of livelihoo·d in the modern world. That is why, under the law, the employer is required to ccntribute 3-1/2% of the earnings of his employees and the employee contributes 2-1/2% of his earnings. The government in turn contributes an initial capitalization of 1,400,000.00 plus a guarantee of any deficiency in the operation of the system and guarantees that all the commitments of the State under the law for the employees and the employer will be backed up with its financial resources.· '' Speech delivered by Mr. R. P. Anda!, acting chairman and administrator, Social Security System, before the Rotary Club of Manila, at the Wintel' Garden, Manila Hotel, on September 5, 1957, at 12: 15 p.m. PAGE 64 By Rodolfo P. Andal The initial target of coverage is 350,000 employees working in firms employing at least 50 persons. On the second year of operation, the coverage will include about 3 million employees working in firms and establishments employing at lea~t 6 persons. According to statistics of the Central Bank, there are around 8 million. workers in the Philippines today of which 3 to 4 million are farm workers and 4 to 5 million are workers in industrial, commercial and governmental establishments. Out of these 4 million workers, there are barely 400,000 having social security protection. The ultimate tar;;et, therefore, of our so·cial security will be to cover the balance of 3,600,000 which is the main bulk of the . labo·r force of the nation, excluding farm workers which will eventually be absorbed by amendatory legislation. Since we started the implementation of the law, much has been said against it than in its favor. There are 3 main objections raise<) by employees who have private plans with substantial semblance of social security. The objections are primarily based on the following: Fil'stly, that the law will deprive employees of bigger benefits now enjoyed under their present private plans. and that their integration into the Social Security System may be tantamount to deprivation of property rights without due process; Secondly, that the benefits which the members may derive under the law are not compatible with the contributions they are giving to· the System; Thirdly, there is fear amcng employees that they will not derive any benefit out of their coutribution to the System in case they are separated from the service before retirement; and Fourthly, that it may adversely affect the growth of private insurance business. There is no basis for the objection that the implementation of the Social Security Act may reduce or deprive employees of firms having existing private plans of existing benefits. Firstly, the Social Security Act provides that benefits in existing private plans will not be reduced, <liminished, or eliminated. In other words, the law prohibits any 'decrease, diminution, q·r abolition of benefits now being enjoyed under private plans. So the objection that the contrary will happen has no basis of law. On the con.trary, the implementation of the Social Security Act, in my way of thinking, strengthens the validity of the existing private plans, which prior to the enactment of the Social Security Act did not have official cognizance by social legislation but are pur-ely based on bilateral or unilateral agreements between employer and employee. So, instead of deprivation, there is recognition· of rights. Secondly, the Social Security Act is a social legislation which gives protecti0n to the working masses. It being a social legislation, 1t takes precedence over individual rights, similar THE PHILIPPINE EDUCATOR to legislations which provide for the exercise of police power of the State. This legal philosophy has been repeatedly sustained by the Courts in the United States, England, and other demorratic countries in the world. Stcondly, social security basically :'110uld have universal application in ord('r that it can achieve stability. The existence n"f priYate plans goes with the fo1'tune of the business or enterprises having surh plans, which is exposed to the hazards of business, such as losses, termination of cO'rporate existence, dissolution by other reasons 01• causes. The continuity of payment of pension to retirees under such private plam; will depend, on the co'ntinuity of .the existence of such companies. ,When such companies are dissolved due to loss, bankruptcy or termination of its corporate life and other causes, then there is termination of· payment o"f the pensions to the retin~es of such private plans. But if these private plans are attached to the Social Security System, the continuity of the payment of pensions to retirees . is guaranteed by the State. Example - In the government, we have the Government Service Insurance System. We are paying around Pl million retirement pay eyery month. A great majority of our ;·ctirees ('Orne from corporations and offices which are no longer in existence, but thes~ benefichiries continue to receive thei.r pension benefits despite thr. dissolutidll of the offices from which they were retired. If the purpose and ·intention -of social security, as universally recogni->:ed, is to irive guaranteed protection for the individual worker, henre the justification of universality of social security. The ihird ohiP,.tion airninst the social serurity act is that the here.fits whirh the me,.nbers JTI'l:V rleriv0 un<ler the law are rot compatible with tli0 cnn~ributinn thiit they give tn the ~ystem. The oresent Social Sec111·itv .Ad ]ms been the p,.nrlnct of mn1·e than three veal's stndv bv leading actuaries d the !"O\•n,-nment an-i of nrivntf' in~urance comnanies, and thev nre ronvincerl th"t the nropo·rtion of contributions to benefits i~ reasonablv hnlnn,..ed :'Ind th"t the S'•dPm is probably the cheapest of its kind available in the Philippin-es. As to the 0hiection that an employee will not derive any benefit <'Ut of his contribution td the System in case he is separatrrl from the Rervice before J'Ptirement. I wish to reiterate that unclPr such a situation, the Commission under the Jaw may give the employee three courses of artion to' take: Firstly, he can ask to rontinue hiR membership by paying the contribution of the employer ftnd the employee; Secondly, his contribution may be refunded with at least 2% interest co'mpounded annually; Thirdly, he may ask for the conversion of his credit into a paid-up insurance plan. It is therefore clear that there is no deprivation of savings or contribution of any member who may be separated from employment prior to retirement. OCTOBER. 1957 The fourth objection is competition by the State with private insurnnce business. In the l'nited States, when social security was in process of devekpment, the1·e was vigorous opposition against it from private insurance companies and other financial institutions handling credit. These opponents believed that it will eliminate the expansion of such financial institutions. How-ever, after the deYelopment of social security had started, · the production of priYate insurance companies in the United States was not reduced but on the contrary it has increased by more than fom· times beyond the expectation of the proponents and opponents of social security. This -paradox has been attributed to the chain reaction generated by social security along psychological iines, that is, it made the people insurance conscious and it created multiplication of reinsurance business thereon. I feel that this result . or effect of social security on priYate insurance companies and other financial institutions that handle credit will hol<l true in the Philippines. This is borne by the experi2nce of the government when it started the organization of the Government Service Insuranc.e System in 19::!7. The same objections were raised by the same elements, but as we already know, my friends, production of insurance companies has grown bigger and bigger starting from the time the GSIS has been organized. Whi!E> rncial security has for its main purpose the protection of the worker5 against the hazards in life and the improvement of their social and living conditio·ns, it has a tremendous impact in our economic development. It is a dynamic institution of people that mobilizes their savings and makes such savings available to finance the expansion of existing industries and development of new ones. This is the undeniable outcome of social security in the United States and in other countries. Our country being an undeveloped one, is in dire need of capital o'r funds to finance its economic deve!Jpment. For many years, we have relied on existing financial institutions, such as banks and insurance companies to tap local sources of funds and at the same time consistently resorted to bo·rrowing of capital from foreign countries. Despite the availability of these sources, we are still confronted with the perennial problem of· raising funds for our development. If social security as experienced by other countries in th" world· is a potential and dynamic institution that mobilizes the savings of the people and in tum puts these into a reservoir of funds available for pro<ludive im·estme11ts, then, my friends, social security may be a missing link in solving the financing problems of our industrialization and develo·pment of our natural resources. I feel that the utilization of these savings of the people to finance our deV"!lopment is co·nducive to the existence of a strong and dependable citizenry where the people become individual participants or investors in the econnmic gro·wth of our country. I thank you. PAGE 65
Date: 1957
Rights