The government and the employers will also contribute one per cent each. Military personnel and MPs have been excluded.
The scheme, drawn up with the help of the International Labour Organisation, aims to raise BD30-40 million a year to help the unemployed find a footing in the labour market as well as those laid off following the closure of their companies and are awaiting their dues.
According to government statistics, the unemployment rate is below four per cent, with around 20,000 jobless citizens. There are about half a million people working in Bahrain, including 200,000 Bahrainis.
“About BD15 million is required to fund 20,000 unemployed a year,” an official said.
The scheme follows hard on the heels of the recently- approved directive to companies to contribute 18 per cent a month to the General Organisation of Social Insurance which will manage the fund in collaboration with the Ministry of Labour.
However, the deduction has become a cause for concern with the employed and small and medium businesses worrying about ‘its impact’ on them and diluting its “expected benefits.”
Economist at the Bahrain Chamber of Commerce and Industry, Dr Hussein Al Mahdi, the burden would be substantial on private and public sector workers as well as the self-employed proprietors of small and medium entities which comprise more than 80 per cent of total businesses.
“The move is good but ill- timed. Any plan that addresses labour market problems is welcome, but the unemployment fund will be a burden on workers and the business community already reeling under the onslaught of spiralling prices,” he said.
“Deduction akin to an unladderised income tax at this stage of the business cycle when prices of perishable commodities, consumer goods, and residential units are an all-time high, would add to the burden on workers, especially those earning less than the minimum wage.”
More than three quarters of the commercial activities rest in the hands of small and medium enterprises, many of whom cannot afford to pay a significant chunk of their operating revenues towards the unemployment insurance scheme. If they are forced to do, then it will stunt their growth and profit projections,” he said.
The Government, which a surplus of BD300 million courtesy of the steep 44 per cent increase in oil revenue because of the increase in its prices “could ease the pressure on workers and businesses by contribution to the fund for the next several years,” Dr Al Mahdi said.
The estimated BD35-40 million to be raised through the unemployment insurance scheme is minuscule in comparison. And a law can be enacted in better times, he said.
Khalifa Najem, director of financial institutions at the Bahrain Islamic Bank and member of the Bankers Union, says the scheme would not guarantee a drop in the unemployment rate.
“Paying job seekers and unemployed undergraduates doles ranging between BD150 and BD500 – the maximum being way beyond the minimum wage – will quell their incentive to secure jobs despite the six-month deadline for the allowance.”
This possibility, he said, along with the absence of a sound regulatory framework and an independent body to monitor the scheme, would leave the gates wide open for loopholes and irregularities.
“The end result will be an unchanged status of the unemployed unless the drawbacks are adequately addressed.”
An estimated 10,000 Bahrainis are unemployed and as many roll out of universities and schools annually. Besides, at least 45,000 free visa workers await livelihood, says Ahmed Sultani of the Bahrain Jobseekers Forum.
He said the government should have taken all segments of Bahraini mainstream into confidence before finalising the plan. “We were not involved in the process,” he added tersely.
