Social security and insurance is a complicated issue in Iran given the favorable and dominant paradigm of social insurance during the last century, which is based on the Bismarckian model (premium-oriented) and the participation of people and businesses with jobs or financial ability. That’s why regulation of labor relations and the conditions and requirements regarding work and employment have had a variety of effects on social insurance and Social Security Organization of Iran. Not very long ago, the insurance coverage was focused on jobs and employment and wage-earning. It was only after the approval of the Law on the Structure of the Comprehensive Welfare and Social Security System that lawmakers paid attention to the provision of social insurance coverage for other groups of people. Ali Heydari, social security expert, prefaced his article for Persian daily Ta’adol with this note. Below is a translation of the text.
Although Articles 3, 43 and 29 of the Iranian Constitution, have envisioned the provision of social insurance and social security for all people, the dominant approach in the social insurance is the insurance of workers and professions. You can say that the future of social security and social insurance depends to a great extent on the future of work and employment in the country.
If the paradigm of social insurance in Iran switches from premium-oriented (Bismarckian) to tax-oriented (Beveridge) or if a comprehensive, inclusive and multi-layered social security system is created, the social insurance may become more dependent on economic variables and redistribution policies and the consequences of the regulation of labor relations on insurers and especially the Social Security Organization of Iran may reduce.
For example, in the past, army employees were no longer able to continue social insurance and social insurance payments in the relevant funds in the event of leaving the service; social insurance coverage was only available to individuals based on their employment, while according to the principles of the Constitution, inclusion and social insurance is a universal right, that is why social insurance has been stipulated as part of Paragraph 5 of the general policies of social security, only the sum of insurance contribution of partners, i.e. the government, the insured and the employer, should be adjusted “according to the status of individuals”.
Trouble Ahead
At present, labor, employment and business sector uses the services of SSO to address the problems of the labor market and to cover the shortcomings related to the regulation of labor relations and to reduce the level of tension between the worker and the employer. Over the past two decades, when it came to downsizing, employers imposed their human resources on SSO through early retirements, establishing unemployment insurance as per agreed dismissals. Those in charge of protecting the labor law not only embraced them but helped create consequences for SSO via involuntary dismissals and determining the culprits of work-related accidents and the restoration of insurance records.
On the other hand, as a result of the lack of a comprehensive and multi-layered social security system during the last two decades, the government and the parliament have imposed overflows of support on SSO and whenever they sought to support a group of people and provide them with livelihood, they forced SSO to extend social insurance coverage; all or part of the employer’s or insured’s share of the insurance premium has been guaranteed or pledged as a loan, and because the government has failed to pay these premiums on time for the past half a century, the social security organization has suffered a severe deficit. Therefore, because of the lack of a comprehensive and multi-layered social security system, the social security organization will be in trouble in the future.
Job Security, Formal Labor Market on the Decline
The 1980s were the beginning of the approval and implementation of the labor law and the job security of the workers were protected to some extent and the labor unions had a lot of clout and influence in the workshops and the labor market of the country. After that decade, the non-independence of organizations related to social partners and the abandonment of some provisions of the labor law due to the popularity of temporary labor contracts and the labor law was undermined with the permits issued by the ministers of labor and social affairs and a large part of the country’s employment was practically no longer official. Underground economy grabbed a bigger share of employment and many workers and wage earners were deprived of the basic and fundamental rights to work and social security. Only when the workforce had an accident or died, or were old, could they secure insurance.
At present, more than 50% of the pensions provided by the Social Security Organization are premature and conciliatory, and also according to the laws that were approved over time, the organization is required to provide pensions for people who have worked for less than 20 and 10 years.
On the resource side, the scope of insurance coverage for wage earners has reduced gradually. With laws and regulations that are not very comprehensive, a significant part of those covered by the Labor and Social Security Laws have been excluded from the coverage of compulsory insurance and so the density of compulsory insurance has reduced. Optional and contractual insured (credit insurances whose insurance premiums are paid by the government) account for a significant part of the insurance payers of the social security organization. The share of compulsory insured is decreasing, indicating that job security and formal labor market is on the decline.
Therefore, it seems that if the general policies of social security, especially Clauses One, Two and Five, take effect as soon as possible and if a comprehensive security system based on the layering of coverage and services (aid, support and insurance) and the leveling of the social insurance (basic, surplus and supplementary) is established and if the basic level of relief, support and insurance services is provided and guaranteed by the government for the members of the society, especially the weak groups of the society, we can hope that SSO will escape the complications and consequences of the shortcomings in the law.
Below is a part of the effects of the future of work on social security, which can be positive or negative.
Change in the Age Density of the Population
The aging of the population and the increase in the share of the elderly in the demographic composition of the countries and the increase in life expectancy, if not accompanied by the application of parametric reforms and a logical and scientific relationship between the minimum age required for retirement and life expectancy will lead to a decrease in the rate of economic participation and active population and imbalance of pension funds.
Change in the Gender Density of the Labor Market
Thanks to the strong presence of women in higher education and increase in their role and participation in the labor market and employment, it is necessary to implement the laws and regulations related to dependent insured persons. Also, given the specific protective laws for women such as maternity leave and early retirements, the government’s failure to finance the implementation of these measures will cause pension fund to run deficit.
Change in the Educational and Skill Density of the Labor Market
Given the technological changes and the specialization and professionalization of activities and the formation of the virtual business environment, the share of educated and skilled workers in the labor market has increased compared with simple labor, therefore the system of regulating labor relations and labor organizations and the insurance system should adjust to the demands of this group.
Change in the Density of Industry/Market Types
Given the general shift from large-scale industries to medium and small industries and the increase in the share of the services sector compared with the industry sector, insurance structures and mechanisms need to become flexible to cover small and service industries and monitor all the activities based on outsourcing and employability and ensure the correct regulation of labor relations and compliance with the fundamental rights of the workforce, including having social insurance coverage.
Change in the Density of Workforce Type
The emerging technologies, economies and enterprises such as start-ups, knowledge-based companies, shared workspaces, small and home-based jobs, mass production in cottages or production without a factory have led to the emergence of a large number of freelancers. Here, traditional means of regulating labor relations and social security are not sufficient and appropriate in order to monitor them.
Migration
The migration of labor force, physically or virtually (being present in Iran and being employed by foreign companies and receiving benefits in virtual space through cryptocurrencies), leads to a decrease in social insurance sector inputs and can lead to an increase in the inputs of the support sector in the future (especially when these people reach old age or suffer from illness and accidents.)
Failure to Streamline Foreign Labor Force
The presence of illegal foreign labor force and lack of related organization and management of them and the absence of social diplomacy (not providing social insurance coverage for foreigners working or living in Iran) leads to them being seen as cheap labor force. The job opportunities of young Iranians will be lost and employers will avoid paying premiums and the income of the social insurance funds will reduce.
Polarization of the Business Environment
The formation of the virtual space and polarization of the business environment and the employment market of Iran (smartization, digitalization, internetization and electronicization of activities) have hidden a significant part of the country’s economy and economic exchanges from labor and social security laws. It is necessary to update monitoring tools and mechanisms as soon as possible or move toward a tax-based insurance system at the basic level.
Regulatory System
The lack of a social security regulatory mechanism or system has led to the expansion of non-insurance interventions and the imposition of support spillovers on social insurance organizations and funds. The formation of a regulatory mechanism in a professional, independent and cross-sectoral manner can prevent these interventions and lead to financial stabilization of organizations and social insurance funds.
Comprehensive and Multi-Layered Social Security System
The lack of a comprehensive and multi-layered social security system and the lack of layering of coverage (aid, support and insurance) and the lack of leveling of insurance layer services (basic, excess and supplementary) can lead to the imposition of protection overflows to the insurance system. Also the absence of fair access to services and coverage and fair benefit from public resources will reduce the desire for employment and insurance and increase the imbalance of pension funds.
Absence of Basic Registration Information
The lack of database, system and window of service, electronic file and welfare and social security unit (based on national code, postal code and job code) and failure to measure affordability and entitlement of individuals and households can lead to overlapping of services and interference in affairs and parallel work, which is to the detriment of the social insurance system.
Misguided Subsidies
The lack of concentration of social subsidies (targeted to individuals and households) and the continuation of aimless subsidies, the absence of need-analysis and effective targeting result in the decrease in the desire for employment, the persistence of which will reduce the inputs of the insurance and increase in the reproduction of rent.
Social Resilience
Failure to apply a community-oriented, empowering and re-socializing approach (equalizing economic and social opportunities, eliminating inequalities and creating a context for return to the work-family environment and society) for those suffering from poverty and social ills leads to a decrease in the income of the social insurance funds and an increase in the costs of the relief and support sector.
Multilateral Dialogue
The lack of real organizations for the labor force and non-formation of independent trade unions and full coverage of the labor force (salaried workers, wage earners, employers, etc.) have transpired into the absence of a real and independent representative for workers in the decision-making, executive and supervisory systems of the country. The decisions made in this field are not subject to the consensus of all stakeholders.
Labor Force Fluidity
The diversity and rise in flexibility in the labor market and employment in terms of the type of employment relationship, how to use the time of performing activities and providing services, the place of performing work and providing services and, in general, the fluidity of the labor force with regard to emerging technologies and new mechanisms require the creation of fluidity in the regulation of labor relations and social security mechanisms. The prerequisite for this is the formation of a multi-layered social security system by guaranteeing and providing the basic level of relief, support and insurance coverage by the government. Unskilled workers should be confidence about the provision of minimum coverage and the skilled and educated workforce can also benefit from the services and coverage at the higher levels with the financial participation of the beneficiary and the employer.
In short, the only way to ensure a favorable future in work and social security and most importantly to be able to protect the public, especially the low-income groups against economic and social distress and shocks and impulses and ensure social resilience, is quick and accurate implementation of the general social security policies and the formation of the universal social security system.
