In late April 2013 Kuwait’s government introduced new legislation aimed at providing Kuwaiti citizens with insurance against unemployment. The Unemployment Insurance Law (UIL) provides six months of coverage for nationals that have recently lost their jobs. This is the newest addition to the country’s extensive existing social safety net, which is overseen by a handful of government organisations, including the Public Institution for Social Security (PIFSS) and the Ministry of Social Affairs and Labour (MOSAL), among others.
In addition to boosting income security in Kuwait, the new law is expected to raise awareness of the benefits of insurance among the general population, which bodes well for the sector as a whole. At the same time, the fact that the plan is managed by the government has raised concerns about increasing the population’s reliance on state-led social programmes.
Background
Kuwait has a long history of social welfare. The county has had a pension scheme for government employees in place since the mid-1950s, and the PIFSS, which provides coverage for the elderly, the disabled and the sick, was established almost four decades ago in 1976. The system is financed by fees levied on employers and employees at all public and private companies operating in Kuwait.
In addition to the PIFSS, the government oversees the Manpower and Government Restructuring Programme, which provides monthly payments to Kuwaiti citizens working in the private sector. The initiative was developed in an effort to support and encourage the expansion of private sector employment in the country, which is considered to be a national priority.
As of the end of 2012 – the most recent year for which data was available at the time of writing – the unemployment rate among Kuwaiti nationals was 3%, according to the IMF, down from 3.4% at the end of 2011, 3.6% at the end of 2009 and 6.1% at the end of 2007. The reduction in unemployment over the past five years can principally be attributed to an expansion in public sector hiring in the wake of the 2007-08 global financial downturn. The UIL is considered to be the state’s most recent effort in this vein.
The New Law
To be eligible to participate under the new scheme, Kuwaiti citizens must be between the ages of 18 and 60; must be capable of working; must not be entitled to receive a pension; and must have been employed for at least six months since the UIL was launched. In light of this last requirement, beneficiaries of the initiative have been eligible to collect unemployment since November 1, 2013. Participants in the programme are entitled to receive 60% of their monthly salary rate for six uninterrupted months following the loss of their job, provided they meet requirements put forward by the PIFSS and MOSAL.
Beneficiaries of the UIL are expected to use the six-month unemployment period to seek new work. Participants can accept any job that is deemed suitable for them by the Ministry of Finance, and they may be required to complete additional training or education courses to maintain unemployment benefits for the full six-month period. To finance the programme, both Kuwaiti employers and employees are required to contribute 0.5% of a participating employee’s monthly salary. The government also contributes 0.5% of an employee’s salary on a monthly basis.
The UIL was designed in large part to support those Kuwaitis who are employed in the private sector, many of whom lost their jobs following a period of private sector cutbacks in the wake of the 2007-08 downturn. The plan has attracted criticism from some local players on the grounds that it requires additional public sector spending, thereby further depleting state coffers. However, the government has maintained that the long-term impact of the UIL will likely be an increase in Kuwaiti participation in the private sector workforce, which will, in turn, reduce pressure on public sector institutions. This is in line with the country’s broader goal of providing private sector employment for 15,000 Kuwaitis on an annual basis, with the aim of reducing the size of the public sector workforce.
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