Bahrain is taking steps to tackle its unemployment problem and has brought down its jobless rate from 16 per cent to 3. 5 per cent in the past five years. Bahrain started to discuss policies aimed at reducing unemployment among its citizens. Over the past five years, the key project was the establishment of the Unemployment Insurance System (UIS), which is unique in the Arab world. The system allows unemployed citizens, who are registered with the Ministry of Labor, to receive a financial assistance for six months based on their qualification and experience.
During the period, they will have to look for a job with the help of the ministry and in some cases they would join training programmers. Unless they resigned or were fired for reasons of violating job ethics, Bahraini employees are entitled to financial assistance for losing their job because of reasons beyond their control. The unemployment assistance in this case would be equal to 60 per cent of their last received salary in the last job they worked. The fund of the UIS is financed through contributions from Bahraini employees and employers. The result of the program was quite significant.
We managed to reduce unemployment among nearly 20,000 citizens to 7,200 job seekers. The balance of 12,800 who found employment through the program in addition to those who entered the job market during the past four years, have been offered jobs in the private sector. This indicates the success of the program. The main advantage of the program is that it addresses the unemployment problem whilst saving the dignity of citizens. The system offers policy makers an indicator of the level of unemployment in the country. In addition to the USI, the government has established a training centre that offers a variety of programs.
The investment in the centre has paid off very well. It helped thousands of Bahraini workers looking for jobs in the private sector to become productive employees from the first day of their recruitment. It is important to note that the negative development on the Gulf States’ labour market cannot be attributed to differences in the size of the working age population or the participation rates among working age people. Hence, it would be wrong to argue that labour supply has raised so much in the Gulf, no wonder that labour demand could not expand by an equivalent amount.
An extreme version of this thinking is reflected in the folly notion of a lump sum of labour which argues that unemployment can only be solved by dividing more equally among workers a given pie of labour demand. This paper aims at contributing to a better understanding of indigenous problems and their impact on aggregate equilibrium unemployment and social welfare. The paper seeks to diagnose the problem in the six GCC states and suggests some method somewhat connected with a scheme for enhancing social welfare whereby to rectify the current situation with policy implications deemed appropriate for the current situation.
Government and private sector workers will soon be granted an option of choosing the manner in which their pension payments are calculated. They get to choose between a one-off 10 percent hike to their monthly pension, or a lump-sum bonus calculated at three percent of their average salary, multiplied by the months of service post-retirement. Either way, they will be entitled to get their regular monthly pension payments, in addition to the statutory annual increase of 3 percent. The Shura Council yesterday supported the parliament by approving the measures in a government-drafted bill, originally based on a council proposal.
The Pension Fund Authority (PFA) said it would support the bill, as it would ensure fairness for pensioners, irrespective of their place of work. The PFA has also agreed to offer the choice to beneficiaries, who inherit the pension, in the event of demise of the breadwinner. However, the recipients will have to submit their choice to the PFA beforehand. At present, the private sector pensioners are eligible for a 10 percent increase on their monthly pension, while pensioners in the government sector will receive a cash payment. However, those who have been compelled to quit their job due to permanent injury will get only the 10 percent hike.
Giving them the lump sum, would deplete PFA funds, as the recipients will not have completed the requisite years of service, says the bill. Its small population and high gross domestic product allow Bahrain to fund the welfare of its people without needing to impose many financial obligations upon them. (This also means that the government avoids the high costs of administering such schemes. ) Nationals are automatically provided with extensive state help, including medical care, sickness and maternity cover, child care, pensions, unemployment benefit and in some instances housing and disability benefits.
Foreign workers have access to medical facilities, but to little else. In fact, Bahrain is beginning to pressurise companies to provide medical insurance for their employees to ease expatriate pressure on state healthcare programmes, and private medical insurance is recommended for most foreigners. Pensions There are no state pension schemes in Bahrain for foreign expatriates, although certain state institutions and some international companies have corporate pension schemes.
If you were paying into a state pension scheme while working in your home country, you should continue to do so, even if in a reduced form, such as Class 3 contributions in the UK. These are usually one of the best investments you can make, for the continuous return they provide upon retirement. (You might also be eligible for certain benefits, e. g. the payment of medical costs, while in Bahrain. ) Nevertheless, expatriates should take advantage of their high disposable income in Bahrain to set up a personal pension plan.
There are many companies offering a variety of schemes, either based on lump sums or supported by regular savings. In Bahrain, the social insurance service is governed by the social insurance law of 1976. The system covers Bahraini employed persons in establishments with one or more employees or working in one of the Gulf Cooperation Council countries (Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates). Household workers, certain groups of agricultural employees, casual workers, temporary noncitizen workers, and other groups as specified by law are excluded from the system. Further, public-sector employees have a special system.
Coverage is voluntary for those persons with 5 or more years of previous compulsory social security coverage but who are no longer covered on a compulsory basis, self-employed persons, and other Bahraini citizens working abroad. Voluntary contributors are covered for old-age, disability, and survivor benefits. Funds are contributed by both the insured person and its employer in the following proportions: (i) Insured person: 6% of total monthly earnings; and (ii) Employer: 9% of the employee’s monthly earnings. The maximum monthly earnings used to calculate contributions are 4,000 dinars (approximately USD 10,600).
In the case of self-employed persons, the contribution amounts to 15% of monthly income for voluntary contributors. The monthly income used to calculate contributions is chosen by the self-employed person when joining the system but must be between 200 dinars (approximately USD 530) and 1,000 dinars (approximately USD 2660); thereafter, the monthly income used to calculate contributions may be increased or decreased annually by up to 5% but must be between 200 dinars (approximately USD 530) and 1,500 dinars (approximately USD 4000). For those making voluntary contributions, the contribution amounts to 15% of declared monthly income.
The conditions for retirement are: (i) 60 years old for men and 55 years old for women; and (ii) at least 10 years of coverage. Early pension is possible with at least 20 years of coverage (men) or 15 years of coverage (women). Retirement from usual employment is necessary. Pensioners may work in a new job as long as the combined income from a pension and the job does not exceed the amount earned in the last job before retirement. If the insured person does not meet the contribution conditions for the normal old-age pension, old-age settlement is paid at age 60 for men or at age 55 for women.
The monthly pension is 2% of the insured’s monthly average earnings in the last 2 years multiplied by the number of years of contributions. The maximum contribution period used to calculate the pension is 40 years (up to 5 years of credited contributions may be used to calculate the pension if the insured’s total contribution period does not exceed 30 years). The minimum pension is the insured’s average contributory wage during the last 2 years or 180 dinars (approximately USD 480) a month, whichever is less. The contributory wage is the total monthly wage received in January of each year.
The maximum pension is 80% of the insured’s average earnings plus an additional 10% of the pension. Instead of an additional 10%, the beneficiary can opt for a lump sum of 3% of the monthly average earnings in the last 2 years multiplied by 12 times the number of years of coverage. A lump sum of 11% of average earnings in the last 2 years is paid for each contribution year over 40. In case of early pension, the pension is reduced by 20% if the insured retires before age 45, by 15% if aged 45 to 49, or by 10% if aged 50 to 54. Benefits are increased by 3% every January.