Social welfare is not about charities for the poor. It is a crucial policy tool to bridge the wealth gap and defuse the social timebomb from Thailand’s scandalous inequalities.
We also have enough money to do it. But how?
Dr Somchai Jitsuchon, Research Director of Inclusive Development and Dr Boonwara Sumano, Senior Research Fellow at the Thailand Development Research Institute (TDRI) outlined how to expand universal welfare coverage in Thailand and how to make the system financially sustainable in their talk “Toward a New Welfare System: Leaving No One Behind” at the 2021 TDRI Annual Conference on Nov 9 in Bangkok.
“Thai society still thinks welfare is charity to help the poor. This is a huge misconception,” said Dr Somchai. “Welfare is a people-centred development policy which can tackle many explosive problems such as gross inequalities, economic stagnation from ageing society, and economic waste from the idle workforce.”
The disparity in Thailand is among the worst in the world. The top 10% owns 70-80% of the country’s total wealth and assets. The top 1%, meanwhile, owns half of the country’s wealth. “This is staggering,” he said.
Since inequality severely affects people, the country needs a pro-people policy to undo the damages. A universal welfare system can do the trick, he suggested.
Thailand is also rapidly ageing, he pointed out. With a smaller workforce, human resources development for children and young adults is crucial to maintain economic productivity. However, a significant number of this young workforce is in the bottom 40% of the population. They then lack systematic support to develop their potential to contribute to the economy.
Meanwhile, 60% of the population are at high risk of being left behind by the country’s unequal economic development, he noted.
They are people whose education is below middle school. People in the 40-50 age group in this category comprise 40% of the population. With low education, they lack job skills to survive in the new economy. Another 20% with education below middle school is in the 20-30 age group. They similarly face job dead ends soon.
What’s more, a large number of young people aged between 20-30 are not even in the workforce. According to Dr Somchai, these young people are largely in rural areas, not working, not studying, working, or receiving any job training. They comprise 10% of people in their age group. “This is a great loss of valuable human resources,” he said.
This grim situation results from the lack of systematic support from successive governments to give the people equal opportunities, he noted.
“Unskilled human resources, gross disparity, and unequal opportunities are the reasons why Thailand’s economy is stagnant and stuck in the middle-income trap,” he explained.
The solution: Change Thailand’s economic and development paradigm to be pro-people, starting with welfare for all, he proposed.
The welfare system is not only about social assistance for disadvantaged people as generally believed, Dr Somchai pointed out. “It is also about social service to develop people’s potential, social insurance to protect from risks, and active labour market policy to provide employment.”
“These pro-people welfare elements can effectively foster equal opportunities. A good welfare system leaves no one behind,” he stressed.
Compared to other age groups, for example, small children aged 0-6 are still left behind, lacking state care for proper child development. When pressed to assist, the government prefers targeting specific groups with strict screening rather than providing universal coverage. “Ironically, this screening measure fails to reach many in need,” he said.
For example, the State Welfare Card scheme targets people with an income below 100,000 baht a year. Due to the red tape, the scheme misses half of the people in this category. Similarly, the state assistance to newborns misses 30% of the target group.
“Leaving no one behind,” is just policy makers’ rhetoric because they refuse to understand that universal welfare coverage is an essential policy tool to achieve this goal, he charged.
Nobel laureate Abhijit Banerjee has already pointed out the pros and cons of universal welfare coverage and targeted assistance, said Dr Somchai.
For starters, universal welfare coverage prevents the needy from falling through the cracks. The screening procedures in the limited welfare scheme are also costly. Besides, universal coverage is inclusive, politically sustainable, bridging disparity, and fostering social trust and public consensus on policies to move society forward.
Inequality causes the country to lose innovations through the “lost Einsteins” phenomenon, he pointed out. A study in the United States shows that had students from poor families had equal opportunities as their peers in the top richest 20%, innovations in America would have risen fourfolds.
“I once knew a factory worker named Wut. He won every one when playing chess. But he was poor and did not have life opportunities like others. Later, his problems led him to drug addiction and gambling. Had he had equal opportunities like others, he might have become a successful engineer, a physician, or a top scientist.
“We have countless people like Wut in our society because of social inequality.”
The downside of universal welfare coverage, however, is it requires a huge amount of money to sustain the scheme.
Questions arise, therefore, whether the whole expense should come from the state budget or whether people should also play a part through the co-payment system.
Dr Boonwara Sumano said the welfare structure should be a multi-tier social protection system, financially sustainable, and incorporate participation from other sectors.
The multi-tier protection system should consist of three layers, she proposed. The first layer at the bottom or Social Protection Tier 1 provides universal welfare coverage of basic assistance for everyone in the country. For example, social security, monthly allowances for the elderly and people with disabilities, and the quasi-universal basic income.
The current welfare benefits that target only a specific group, such as the allowances for newborns, should all be expanded into universal coverage in line with the government’s “leaving no one behind” policy.
The Social Protection Tier 2 involves the co-payment schemes such as joint contributions from the employees and employers in the social provident fund scheme or the social security system.
The top layer or Social Protection Tier 3, however, is solely responsible by the insurers or independent workers who want to have special welfare benefits.
The Social Protection Tier 1 contains three schemes, said Dr Boonwara. First, the cash for care for one million toddlers aged from three months to two years old. This scheme costs 53 billion baht.
Second, the limited universal upskill/reskill for the workforce. Under this scheme, the workers with education below middle school will receive a coupon of 6,000 baht every three years to upskill or reskill themselves. This scheme costs 68 billion baht.
Third, the quasi-universal basic income scheme for every citizen except those in the high-income brackets. Given the 600-baht monthly allowance for about 60% of the population, this scheme will cost about 3 trillion baht a year.
“The government should also consider offering a long-term care scheme for those who can afford additional contributions,” she proposed.”In an ageing society, this scheme is necessary for people who do not have children or relatives to care for them in old age.”
Those three schemes combined cost the taxpayers 4 to 5 trillion baht. “Which Thailand can afford,” she asserted.
The money can come from raising VAT to 10% and from increasing income taxes for both individuals and legal entities, she explained.
Many other taxes should also become progressive because the rich who own most assets in the country definitely can pay more. With political will on progressive taxes, the long-term financial sustainability of the universal welfare schemes is not a question, she said.
The government should also reduce state spendings on business ventures such as investment in infrastructure, she proposes. Engaging in business makes the state a competitor of the business sector. This is against the Constitution, she added.
Instead of competing with the businesses, the government should invest in social spending especially in human resources development. “The government should also encourage the business sector and civil society to participate in the universal welfare system,” proposed Dr Boonwara.
Public donations in Thailand reach 73 billion a year on average, reflecting high public empathy and financial capacity to help the underprivileged. The number of corporate social responsibility programmes in the business sector is also rising steadily with combined funds of nearly 4 billion baht, she reported. Meanwhile, the number of non-governmental organisations and associations specialising in social service is also on the rise.
Despite the huge amount of cash donations, the money is scattered in different directions and unable to tackle the complicated social problems. The organisations specialising in long-term solutions, however, operate with difficulties due to a shortage of funding during the global economic slowdown and the pandemic.
“We need to bridge the gap,” she said. “We need to figure out how to help competent groups continue doing their good work. We also need to develop the indicators that show us how their work benefits the recipient. Also, we need to develop a monitoring and evaluation system to see if the projects meet our goals.
This model of connecting the business with competent civic groups to address complicated social problems is called Social Impact Partnership or SIP Model in short. It has proved effective in over 30 countries, she reported.
For example, in the United States, two corporations, namely Goldman Sachs’ Urban Investment Group and J.B. Pritzker, joined forces with a $US 7 million funding to support a five-year project to improve literacy for preschool children in poor families in the state of Utah.
Thanks to the literacy programme, only one child needs special tutoring services from the state. The government of Utah then donated its literacy tutoring budget to the project so it can help poor children in other areas.
For this SIP Model to be possible in Thailand, Dr Boonwara said society needs to look at donations as an investment for concrete change in society, and with financial transparency.
For the business sector, instead of spending their CSR budgets in different directions, they should consider joining their money and efforts to improve the livelihood of their target groups together.
The social service organisations must also strengthen their operations and management to be ready for the SIP model, she added.
“Social welfare in Thailand still has many holes in the system,” Dr Boonwara noted. “The government must invest more to improve social security and services. Meanwhile, the business sector, civic groups, and the communities do not have to wait for the government to act first. They can work together to fill the gap to move society forward without leaving anyone behind.”