Conclusion and Policy Recommendations

We can learn a number of lessons from Thailand’s experiences.

First, as far as the formal workers are concerned, contributory social security schemes can work effectively even in the relatively early stage of economic development. Even unemployment insurance, which is often viewed as a luxurious good affordable only to rich, developed countries, can function well in a middle-income country.

However, it is not advisable to keep the pension scheme under the same management with the other social security schemes. Thailand’s pension scheme is very likely to run a huge deficit in the not-so-distant future, unless the present regulations are changed drastically. Although most of East Asian economies are facing mushrooming deficits in their pension scheme, Thailand may face even harsher predicaments because the Social Security Office’s pension scheme is not financially separated from the other social security schemes. As a prospect of a financial crisis of the pension scheme becomes more obvious, it may seriously shake the general public’s confidence in Thailand’s social security system as a whole.

Second, it is prohibitively difficult for lower or middle-income countries to effectively extend social protection to the economically disadvantaged informal workers and their families by means-tested schemes targeted at the needy. Unless they have very efficient and transparent administrative agencies all over the countries, it is very likely that a large number of the truly needy are excluded, while some non-poor manage to get into the scheme. Thailand’s experiences show that non-contributory tax-financed universal schemes, which offer benefits to informal workers and their families without screening, can often alleviate their plights more effectively, even with a relatively small per-capita budget.

However, non-contributory tax-financed universal schemes alone may not be able to respond well to the diverse needs of the informal workers. It is recommendable to set up supplementary contribution-based schemes with government subsidies to provide additional social protection to informal workers and their families who live above the poverty line. But it is not advisable to make those contribution-based schemes compulsory or replace the non-contributory tax-financed schemes, because a large number of informal workers might not be able to afford to pay contributions.

Third, the implementation of non-contributory tax-financed universal schemes needs a strong political will. It may enhance the popularity of political leaders among the economically disadvantaged people, but it may also antagonize the influential upper and middle classes, who

tend to view the government spending on those schemes as “unconstructive” and worry about an adverse effect on the government coffer.

However, it is not advisable to rely solely on the political will of a single political leader or party to implement non-contributory tax-financed universal schemes. If the schemes come to be viewed by many as a “signature policy” of a particular political leader, they may become a target of criticism, when that political leader loses his or her power.

In the case of Thailand, it is unfortunate that the Universal Health Care Scheme came to be viewed as a brainchild of former Prime Minister Thaksin, despite the fact that many reformist bureaucrats and civic organizations played key roles in designing the scheme. Overall, Thailand’s Universal Health Scheme has improved the quality of life of the economically disadvantaged people greatly. But it is also true that it needs to go through some reforms to work better and respond to the changing social and economic situations. Even for academic scholars, however, it is now difficult to discuss about the pros and cons of the scheme and propose a reform plan without being entangled with deepening political conflict between the anti-Thaksin and pro-Thaksin camps.

Finding a proper balance between enhancing the contribution-based social security schemes designed mainly for formal workers and supporting the non-contributory universal schemes designed mainly for needy informal workers requires not only a strong political will to fight against the opponents but also political compromise and social dialogue among diverse groups in the society.

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