Public Goods in Action–Social

Insurance and Social Security

Public Finance and Public Policy
Social Insurance
 Introduction
• There has been a radical change in the nature and scope of government
spending in the last half century.
• A set of programs known as social insurance programs have become a
much larger share of the state budget.
• Some of the more important social welfare programs include:
• Social Security (next week)
• Unemployment Insurance
• Disability Insurance
• Workers’ Compensation
• Medicare
Social Security in Indonesia Context

Jenis Jaminan Sosial :

• Jaminan Kesehatan
• Jaminan Kecelakaan Kerja
• Jaminan Hari Tua
• Jaminan Pensiun
• Jaminan Kematian
 Introduction
• These programs have several common features:
• Contributions are mandatory.
• There is a measurable, enabling event.
• Benefits are not related to one’s income or assets.
 Introduction
• To discuss these programs, we need to understand the general economics
of insurance markets.
1. Why is insurance valued by consumers?
2. What forces may cause the insurance market to fail? What is adverse selection?
3. What happens to social efficiency? What is moral hazard?
4. What tradeoffs must be made in designing social insurance programs?
• Central to this discussion are two key concepts:
• Adverse selection: the fact that the insured individual knows more about her
own risk level than does the insurer.
• Moral hazard: when you insure individuals against adverse events, you can
encourage adverse behavior.
 1. WHAT IS INSURANCE AND WHY DO INDIVIDUALS
VALUE IT?: What Is Insurance?

• Insurance has a common structure:

• Individuals pay money to an insurer, called an insurance premium.
• In return, the insurer promises to make some payment to the insured party (or
those providing services) if an adverse event occurs.
• Obvious examples include health insurance, automobile insurance, life
insurance, and casualty and property insurance.
 Why Do Individuals Value Insurance?

• Insurance is valuable to individuals because of the principle of diminishing

marginal utility.
• This principle implies that if given the choice between either (a) two
years of “average” consumption or (b) one year of excessive
consumption and one year of starvation, individuals would prefer the
former.
• The reason individuals do not prefer choice (a) is that excessive
consumption does not raise their utility as much as the starvation lowers
it.
• Thus, individuals want to smooth their consumption, or move
consumption from periods when it is high to periods when it is low.
 Why Do Individuals Value Insurance?

• When outcomes are uncertain, individuals wish to smooth their

consumption over possible states of the world.
• For example, two states of the world for next year might be “getting hit by a car”
or “not getting hit.”
• The goal is to make a choice today that determines consumption in the future in
each of these states of the world.
• Individuals choose across consumption in states of the world by using
some of their income today to buy insurance against an adverse outcome
tomorrow.
• By buying insurance, individuals commit to make a payment if the uncertain
outcome is positive (no accident), in return for getting a benefit in the negative
outcome case (the insurance payout).
 Why Do Individuals Value Insurance?

• Basic insurance theory suggests that individuals will demand full insurance
in order to fully smooth their consumption across states of the world.
• That is, the level of consumption is the same regardless of whether the
accident occurred or not.
Formalizing This Intuition: Expected Utility Model

• Let p stand for the probability of an adverse event.

Then expected utility is:

EU = (1 - p)U (C0 ) + pU (C1 )

• Where, C0 stand for consumption in the good states
of the world
• and C1 stand for consumption in the bad states of
the world.
 Formalizing This Intuition: Expected Utility Model

• This model can be used to examine the individual’s demand for insurance.
• Imagine, for example, that there was a 1% chance that Sam will get into an accident
that caused $30,000 in damages.
• Sam can insure some, none, or all of these medical expenses.
• The policy costs m¢ per $1 of coverage. Full insurance in this case would cost m x
$30,000 (his premium is $mb.)
• If Sam buys a policy that pays him $b in an accident,
• In the state of the world where Sam does get hit, he will be $b-$mb richer than if he
hadn’t bought insurance (insurance claim – premium)
• If he doesn’t get hit by the car, he will be $mb poorer than he otherwise would have
been.
• That is, the insurance policy translates Sam’s consumption from periods when it is high
to periods when it is low.
 Formalizing This Intuition: Expected Utility Model

• Sam’s desire to buy the policy depends on the price that is charged
(premium).
• An actuarially fair premium sets the price charged equal to the
expected payout.
• In this case, the expected payout is $30,000 x 1%, or $300 per policy. So
a $300 premium is actuarially fair.
• With actuarially fair pricing, individuals will want to fully insure
themselves to equalize consumption in all states of the world.
 Formalizing This Intuition: Expected Utility Model

• Consider the case, for example, when the utility function is:

U (C ) = C
• Also assume that C0=30,000. Then expected utility without insurance is:

0.99 30,000 + 0.01 0 = 1715

.
• If, instead, you bought actuarially fair insurance for $300, expected utility is:

0.99 29,700 + 0.01 29,700 = 172.3

 Formalizing This Intuition: Expected Utility Model

• Utility is higher, even though the odds are that the premium was paid for
nothing. This is because you would rather have equal consumption regardless
of the accident, rather than a very low level in the bad state of the world. This
is illustrated in Table 1.
Table 1

The expected utility model

Consu Utility
Expected utility
If Sam … And Sam is … mption √C

Not hit by a car (D=99%) $30,000 173.2

Doesn’t buy 0.99x173.2 + 0.01x0 = 171.5
insurance Hit by a car (D=1%) 0 0
Buys full Not hit by a car (D=99%) $29,700 172.3
insurance 0.99x172.3 + 0.01x172.3 = 172.3
(for $300) Hit by a car (D=1%) $29,700 172.3
Buys partial Not hit by a car (D=99%) $29,850 172.8
insurance 0.99x172.8 + 0.01x121.8 = 172.2
(for $150) Hit by a car (D=1%) $14,850 121.8
 Formalizing This Intuition: Expected Utility Model

• The central result of expected utility theory is that with actuarially fair
pricing, individuals will want to fully insure themselves to equalize
consumption in all states of the world.
• Clearly Sam’s utility is higher in row 2, with full insurance, than in row 1,
with no insurance.
• Yet, Sam also prefers full insurance to any other level of benefits. Row 3,
which shows coverage for half of the costs of the accident, gives lower
expected utility.
 Formalizing This Intuition: Expected Utility Model

• Thus, even if insurance is expensive, so long as the price (premium) is

actuarially fair, individuals will want to fully insure themselves against
adverse events.
• The implication: the efficient market outcome is full insurance and thus full
consumption smoothing.
 The role of risk aversion

• Risk aversion is the extent to which an individual is willing to bear risk.

• Risk averse individuals have a rapidly diminishing marginal utility of
consumption; they are very afraid of consumption falling.
• Individuals with any degree of risk aversion will buy insurance when it is priced
actuarially fairly. But when the insurance is not fair, some will choose to not buy
insurance.
 2. WHY HAVE SOCIAL INSURANCE?:
Asymmetric Information
• Insurance markets are characterized by informational asymmetry
between individuals and their insurers company.
• The individual knows more about his likelihood of an accident than does
the insurer.
• For example, in the health insurance market, it is likely that the person
buying coverage knows more about his health problems and expected
utilization than does the insurance company.
• The insurer will be reluctant to sell the person a policy at an actuarially
fair price, since they are likely to be a “high risk.”
 Asymmetric Information

• Assume there are 2 groups, each with 100 people. The first group has
5% chance of getting injured, and the second group has a 0.5% chance.
• The payout is $30,000 when injured.
• Table 2 shows how information affects the insurance market in this
context.
 The insurer expects to have 0.5 accidents among
the 100 careful consumers, for a payout of $15,000
Table 2 (0.5 X $30,000 cost per accident), and 5 accidents
among the care- less consumers, for a payout of
Insurance pricing with separate groups of consumers $150,000 (5 X $30,000). So the total expected
insurance payout is $165,000.
Premium per:

Information Pricing Careless Careful Total premiums Total benefits Net profits
approach (100 people) (100 people) paid paid out to insurers

Full Separate $1,500 $150 $165,000 $165,000 0

(100 x $1,500
+ 100 x $150)
Asymmetric Separate $1,500 $150 $30,000 $165,000 -$135,000
(0 x $1,500
+ 200 x $150)
Asymmetric Average $825 $825 $82,500 $150,000 -$67,500
(100 x $825
+ 0 x $825)

With full information, It therefore charges The premium to the accident The insurance company collects $1500 x 100
the insurance separate prices to each prone is therefore 5% x from the accident prone, and $150 x 100 from
company can tell the group; competition forces $30,000. For the careful, it is the careful. Total premiums of $165,000 equal
high risks from the it to charge an actuarially 0.5% x $30,000. expected costs.
low risks. fair price.
 In this case, insurer is
Table 2 expecting to pay out 5
claims to the careless
and 0.5 claims to the
Insurance pricing with separate groups of consumers careful, for a total cost
Premium per: of 5.5 X 30,000, or
$165,000.
Information Pricing Careless Careful Total premiums Total benefits Net profits The company loses
approach (100 people) (100 people) paid paid out to insurers money, so it will not
Full Separate $1,500 $150 $165,000 $165,000 0 offer insurance. Thus,
(100 x $1,500 the market fails;
individuals will not be
+ 100 x $150)
able to obtain the
Asymmetric Separate $1,500 $150 $30,000 $165,000 -$135,000 optimal amount of
(0 x $1,500 insurance.
+ 200 x $150)
Asymmetric Average $825 $825 $82,500 $150,000 -$67,500
(100 x $825
+ 0 x $825)

Now imagine the
insurance company
cannot tell people
apart. This is a case
with asymmetric
information.
It could continue to charge
separate premiums to the
different groups, taking the
person’s word that they are
either careful or accident prone.
The accident prone have no
incentive to tell the company,
however; they pay 10 times as
much if they reveal truthfully
about their status.
The insurance company collects
$150 x 100 from the accident prone,
and $150 x 100 from the careful.
Total premiums of $30,000 are
$135,000 less than expected costs.
 Table 2

Insurance pricing with separate groups of consumers

Premium per:

Information Pricing Careless Careful Total premiums Total benefits Net profits
approach (100 people) (100 people) paid paid out to insurers

Full Separate $1,500 $150 $165,000 $165,000 0

(100 x $1,500
+ 100 x $150)
Asymmetric Separate $1,500 $150 $30,000 $165,000 -$135,000
(0 x $1,500
+ 200 x $150)
Asymmetric Average $825 $825 $82,500 $150,000 -$67,500
(100 x $825
+ 0 x $825)

Another potential
alternative is that the
insurance company
understands it cannot tell
consumers apart. Thus, it
charges a uniform
premium for all customers.
The average cost for the
population as a whole
would be $165,000 in
claims divided by 200
people, or $825 per
person.
With this price structure, none of Again, the company loses money, so it will
the careful people buy the policy. not offer insurance. Thus, the market fails
The company collects $825 x again with a pooling equilibrium.
100 careless people, but pays
paying out $30,000 X 5 =
$150,000 in benefits to those
careless customers. So the
insurance company again loses
money
 Asymmetric Information

• This example illustrates how the problem of adverse selection plagues

the insurance market.
• People have the option of buying insurance, and will only do so if it is a
fair deal for them. Only the high risks take-up the policy so it loses
money.
 The Problem of Adverse Selection

• The insurance market failed because of adverse selection–the fact that

insured individuals know more about their risk level than does the
insurer (if they afford to pay the premium)
• This might cause those most likely to have an adverse outcome to select
insurance, leading insurers to lose money if they offer insurance.
• Only those for whom insurance is a fair deal will buy that insurance.
 Does Asymmetric Information Necessarily Lead to Market Failure?

• Will adverse selection always lead to market failure? Not if:

• Most individuals are fairly risk averse, such that they will buy an actuarially unfair
policy.
• The policy entails a risk premium, the amount that risk-averse individuals will pay for
insurance above and beyond the actuarially fair price.
• This leads to a pooling equilibrium, which is a market equilibrium in which all types buy
full insurance even though it is not fairly priced to all individuals.
• In addition, the insurance company can offer separate products at separate prices,
causing consumers to reveal their true types (careless or careful).
• This leads to a separating equilibrium, which is a market equilibrium in which different
types buy different kinds of insurance products.
 Does Asymmetric Information Necessarily Lead to Market Failure?

• Risk aversion is behavior, it can not be predicted nor assumed.

• The separating equilibrium still represents a market failure.
• Insurers can force the low risks to make a choice between full insurance
at a high price, or partial insurance at a lower price. Although insurance is
offered to both groups in this case, the low risks do not get full
insurance, which is suboptimal.
• All of the cases are relevant for those who afford to pay the insurance
premium.
How the situation happen in Indonesia?

What
about the
rest of
Indonesian
People?
 JAMINAN KESEHATAN BAGI SEMUA ORANG
MERUPAKAN HAK AZASI MANUSIA.
Setiap negara perlu
mengembangkan UHC melalui
mekanisme asuransi kesehatan
sosial untuk menjamin
pembiayaan kesehatan yang
yang berkelanjutan.

Deklarasi PBB 1948 Resolusi WHA ke58

2005 di Jenewa
ttg HAM
Pasal 25, Ayat (1) Pancasila
Sila ke 5

29
UUD 1945 PASAL 28H
UUD 45 Pasal
Setiap 28 H :hidup sejahtera lahir dan batin,
orang berhak
bertempat tinggal, dan mendapatkan lingkungan hidup yang
baik dan sehat serta berhak memperoleh pelayanan
kesehatan.

Setiap orang berhak mendapat kemudahan dan

perlakuan khusus untuk memperoleh kesempatan dan
manfaat yang sama guna mencapai persamaan dan
keadilan.

Setiap orang berhak atas jaminan sosial yang

memungkinkan pengembangan dirinya secara utuh sebagai
manusia yang bermartabat.

30
UUD 1945 Pasal 34 :

Fakir miskin dan anak-anak yang terlantar dipelihara

oleh negara

Negara mengembangkan sistem jaminan sosial bagi

seluruh rakyat dan memberdayakan masyarakat yang
lemah dan tidak mampu sesuai dengan martabat
kemanusiaan.

Negara bertanggung jawab atas penyediaan fasilitas

pelayanan kesehatan dan fasilitas pelayanan umum yang
layak

31
 How Does The Government Address Adverse Selection?

• The government can help correct this kind of market failure. It could:
• Impose an individual mandate that everyone buy insurance at $825 per policy
from the private company.
• It could offer the insurance directly, which would have similar effects.
• Both policies would lead to the low risks subsidizing the high risks.
• If the mechanism still fall to catch up all of the needs, the government
should take over the process.
It is the challenge for us
 OTHER REASONS FOR GOVERNMENT
INTERVENTION IN INSURANCE MARKETS
• Although adverse selection is a compelling motivation for government
intervention in insurance markets, there are also motivations related to:
• Paternalism, A final motivation relates to paternalism. Individuals may simply not
adequately insure themselves unless the government forces them to do so. The market
failure here is the government’s own inability to commit to not helping a person who is
in trouble.
• Externalities, for example, there are negative externalities from underinsurance, such as the
health externalities discussed in Lesson 1.
• Administrative costs, there are also economies of scale in administrative costs, such as
for the Medicare program. Of course, this just suggests that one large firm, not necessarily
the government, should provide the coverage.
• Redistribution, with full information, insurance premiums are vastly different across
individuals. For example, genetic testing may ultimately allow insurers to more accurately
predict health care costs. This raises various questions related to fairness.
 3a. SOCIAL INSURANCE VERSUS SELF-INSURANCE: HOW
MUCH CONSUMPTION SMOOTHING?

• There are ways for individuals to consumption-smooth in the absence of

insurance markets.
• Self-insurance is a private means of smoothing consumption over
adverse events, such as one’s own savings, labor supply of family
members, or borrowing from friends.
 Example: Unemployment Insurance
• Consider unemployment insurance (UI), which provides income to workers who
have lost their jobs.
• Although private unemployment insurance does not exist to smooth consumption, a
person could:
• Draw on their savings
• Borrow, either in collateralized forms or uncollateralized forms.
• Have other family members increase their earnings
• Receive transfers from outside their extended family, friends, or local organizations.
 Figure 2a
With full insurance, UI plays no
consumption smoothing role. E.g.,
UI may crowd out savings.

Perfect Insurance
0%
e
anc
r
su
In
ct
% Change in Consumption

rfe
pe
e
nc
UI plays a full Im
ura

consumption
Ins

smoothing
r
he

-50%
role here.
Ot

UI plays a partial consumption

There is no
No

smoothing role here; it crowds out

crowd out. spousal labor supply, too.
Consumption falls by less (50%), but
When no each $1 of UI increase consumption by
other forms of less than $1. imperfect insurance (such
insurance are as a working spouse).
offered, and
no UI is -100%
offered,
0 100% 0 100% 0 100%
consumption
falls to 0. UI Replacement Rate
 Example: Unemployment Insurance

• If social insurance simply crowds out these other mechanisms, there may
be no consumption smoothing gain or justification for government
intervention. Once we have mechanisms like these, we run into the
problem that public intervention can crowd out private provision
• This is important, since there are efficiency costs of raising government
revenue.
 Example: Unemployment Insurace
• Panel A shows the scenario in which a person has no self-insurance (e.g., no savings,
credit cards, or friends who can loan money to her).
• With no UI, consumption falls by 100%.
• Each percent of wages replaced by UI benefits reduces the fall in consumption by 1%,
shown by the slope equal to 1 in panel A.
• In this case, UI plays a full consumption smoothing role: there is no crowd-out of
self-insurance (because there is no self-insurance).
• Each $1 of UI goes directly to reducing the decline in consumption from
unemployment.
 Example: Unemployment Insurance
• Consider the other extreme, in panel C. A person has full insurance (perhaps private
UI or rich parents).
• With no UI, consumption falls by 0%.
• Each percent of wages replaced by UI benefits does not reduce the fall in consumption
at all, as shown by the slope equal to 0 in panel C.
• In this case, UI plays no full consumption smoothing role, and plays only a crowd-
out role.
• Each $1 of UI simply means that there is one less dollar of self-insurance.
 Example: Unemployment Insurance

• In a middle-ground case (Panel B), UI plays a partial consumption-

smoothing role.
• It is both smoothing consumption and crowding out the use of self-
insurance.
• Figure 2b summarizes these lessons. The UI consumption smoothing
and crowding-out effects depend on the availability of self-insurance.
 Figure 2b
Availability of 0% 50% 100% Full
self-insurance No self- Partial self- self-
insurance insurance insurance

Consumption
smoothing 100% 50% 0%
UI effects
Effects

Crowding out
effects 0% 50% 100%
 Lessons for Consumption-Smoothing Role of Social
Insurance
• In summary, the importance of social insurance programs for
consumption smoothing depends on:
• The predictability of the event (probability of occurrence).
• The cost of the event (the impact of the event).
• The availability of other forms of consumption smoothing.
 3b. THE PROBLEM WITH INSURANCE: MORAL
HAZARD
• When governments intervene in insurance markets, the analysis is
complicated by moral hazard, the adverse behavior that is encouraged
by insuring against an adverse event.
• People tend to be careless person because they are insured.
• Consider the Worker’s Compensation program, for example.
• Clearly, getting injured on the job is the kind of event we want to insure against.
• It is difficult, however, to determine whether the injury was really on-the-job or
not.
• The insurance payouts include both medical costs of treating the injury, and cash
compensation for lost wages.
• Under these circumstances, being “injured” on the “job” starts to look attractive.
 THE PROBLEM WITH INSURANCE: MORAL
HAZARD
• By trying to insure against a legitimate event, the program may actually
encourage individuals to fake injury.
• Nonetheless, moral hazard is an inevitable cost of insurance, either
private or social. Because of optimizing behavior, we increase the
incidence of bad events simply by insuring against them.
 What Determines Moral Hazard?

• The factors that determine moral hazard include how easy it is to detect
whether the adverse event happened and how easy is it to change one’s
behavior to establish the adverse event.
• Moral hazard can arise along many dimensions. In examining the effects
of social insurance, four types of moral hazard play a particularly
important role:
• Reduced precaution against entering the adverse state.
• Increased odds of entering the adverse state.
• Increased expenditure when in the adverse state.
• Supplier responses to insurance against the adverse state.
 4. PUTTING IT ALL TOGETHER:
OPTIMAL SOCIAL INSURANCE
• There are four basic lessons:
• First, individuals value insurance and would ideally like to smooth consumption.
• Second, insurance markets may fail to emerge, primarily because of adverse
selection. But some countries have to tackle more serious problem as some of
their people do not afford to pay the premium.
• Third, private consumption smoothing mechanisms may be available; to the
extent they are, one must examine new consumption smoothing versus crowding
out of existing self-insurance.
• Fourth, expanding insurance encourages moral hazard.
 PUTTING IT ALL TOGETHER:
OPTIMAL SOCIAL INSURANCE
• These lessons have policy implications.
• First, social insurance should be partial.
• Full insurance will almost always encourage adverse behavior.
• Second, social insurance should be more generous for unpredictable,
long-term events where there is less room for private consumption
smoothing.
• Third, more moral hazard should lead to less insurance.
 Recap of Social Insurance:
The New Function of Government
• What is Insurance and Why Do Individuals Value it?
• Why Have Social Insurance?
• Social Insurance versus Self Insurance: How Much Consumption
Smoothing
• The Problem with Insurance: Moral Hazard
• Putting it All Together: Optimal Social Insurance
Social Security
 Introduction
• Social Security is a federal program that taxes workers to provide
income support for the elderly.
• Coverage of the program for all of the workers is the key.
• This lesson reviews institutional features of Social Security, and provides
economic motivations for government intervention.
• It then examines behavioral responses, such as crowding out of saving
and encouraging early retirement.
• Lastly, we examine potential reforms.
 Dasar Hukum

BPJS
BPJS KETENAGAKERJAAN
KESEHATAN

B P J S
UU NO. 24 Tahun 2011 tentang BPJS

JKK
JKM JHT JP
JKN
PP No. 46 Tahun PP No. 45 Tahun
PP No. 82 Tahun 2018 PP No. 44 PP No. 44
2015 & PP No.60
Tahun 2015 Tahun 2015 2015
Tahun 2015

S J S N
UU No. 40 Tahun 2004 tentang SJSN

U U D 1 9 4 5
MANDAT UNDANG-UNDANG vs ILO
SOCIAL SECURITY CONVENTION
Mandat ILO Social Security
UU SJSN Convention No. 102

Program Jaminan Sosial Branches of social security

Jaminan Hari Tua Old-age benefit

Jaminan Pensiun
Jaminan Kecelakaan Kerja Employment injury benefit
Jaminan Kematian Survivors’ benefit
Jaminan Kesehatan Medical care
Sickness benefit
Invalidity benefit
Unemployment benefit
Family benefit
Maternity benefit
 PROFIL SUMBER DAYA MANUSIA
INDONESIA Populasi Usia Kerja
196.462.765

Angkatan Kerja Bukan Angkatan Kerja

136.183.032 60.279.733

Bekerja Pengangguran
129.366.192 6.816.840

Pekerja Bukan Penerima Pekerja Penerima Upah

Upah (PBPU) (PPU)
74.093.224 55.272.968

Belum menjadi Penyelenggara Bukan Penyelenggara

Peserta BPJS TK
Peserta BPJS TK Negara Negara (Perusahaan Besar,
2.420.121
71.673.103 5.041.776 Menengah, Kecil & Mikro)
50.231.192

Pekerja Jasa Konstruksi Belum Menjadi Peserta

*Data BPS Februaris 2019 Peserta BPJS TK BPJS TK
peserta BPJS TK
*Data BPJS TK Februari 2019 19.712.319 21.901.294
8.617.579
Bonus Demografi
% populasi berusia 65 Tahun
dan lebih tua: 5,01%
% populasi berusia 65 Populasi berusia 65 Tahun
Tahun dan lebih tua :
dan lebih tua : 15,78%
9,23%

Usia 0 – 64 : Usia 0 – 64 : Usia 0 – 64 :

94,99% 90,77% 84,22%

• Indonesia harus menggunakan momen bonus demografi untuk penerapan

sistem pensiun sebelum populasi menua terjadi

Sumber : BPJS Ketenagakerjaan

 WHAT IS SOCIAL SECURITY AND HOW DOES IT
WORK?
• Social Security began in 1935,
during the height of the Great
Depression. The main
motivation was to provide a
means of support for this
unfortunate generation of
elderly (USA).
• Basic structure is that workers
(and employers) pay a payroll
tax, and the money is used to
pay benefits to the current
generation of elderly.
The history
Tahapan Penyelenggaraan Jaminan Sosial Ketenagakerjaan

2014 2015 2019 2029

PT. Jamsostek BPJS Ketenagakerjaan Seluruh Pekerja Selambat – lambatnya

(Persero) berubah beroperasi menjadi peserta BPJS pada tahun 2029
menjadi BPJS menyelenggarakan Ketenagakerjaan peserta PT. TASPEN
Ketenagakerjaan program JKK, JHT, JP (prioritas sector formal (Persero) dan PT.
dan JKm sesuai penjelasan ASABRI (Persero)
umum UU SJSN) terdaftar sebagai
peserta BPJS
Ketenagakerjaan

Sumber : UU Nomor 40 Tahun 2004

Program Details
 JHT Manfaat dari Hasil Pengembangan
Jaminan Hari Tua (JHT)

10,55%
10.10% 9,28%
DANA 9.10%
JHT 8.68%

RATA-RATA 6,80% 7,20%

6,63% 5,44% 6,19%
BUNGA
DEPOSITO
2011 2012 2013 2014 2015

AKUMULASI IURAN HASIL PENGEMBANGAN DIATAS

BUNGA DEPOSITO

Besarnya manfaat JHT adalah berupa uang tunai

Manfaat JHT sebelum mencapai usia 56 tahun dapat diambil sebagian
jika mencapai kepesertaan 10 tahun dengan ketentuan sebagai berikut:
• Diambil max 10 % dari total saldo sebagai persiapan usia pensiun
• Diambil max 30% dari total saldo untuk uang perumahan
yang dibayarkan apabila peserta memasuki usia
pensiun, meninggal dunia atau mengalami cacat total
tetap sebesar nilai akumulasi seluruh iuran yang
telah disetor ditambah hasil pengembangannya yang
tercatat dalam rekening perseorangan peserta.
JP
 JP

Terdapat batas atas dan

batas bawah manfaat

Formula ditetapkan JP Iuran ditanggung bersama

MANFAAT IURAN
berdasarkan masa kerja dan oleh pekerja & pemberi
upah terakhir kerja :
- % dari upah/penghasilan
- Nominal
PESERTA
Manfaat pensiun anuitas →
berkala bulanan

Pelindungan berupa uang

tunai terhadap resiko cacat
total tetap, meninggal dunia
atau memasuki usia pensiun
Peserta yang berhak Akumulasi iuran + hasil
mendapatkan manfaat pengembangannya untuk
pensiun anuitas adalah peserta
peserta yang telah memiliki
masa iur sedikitnya 15
tahun, kecuali ditetapkan
lain

62
 JP (Jaminan Pensiun)

SKEMA MANFAAT PASTI (PP 45 tahun 2015)

Peserta memasuki usia pensiun dan tidak memenuhi masa iur

minimum 15 tahun.
MANFAAT PENSIUN MANFAAT PENSIUN
HARI TUA CACAT TOTAL TETAP

Peserta mengalami cacat total tetap atau meninggal dunia,

bilamana:
MANFAAT PENSIUN MANFAAT PENSIUN
JANDA / DUDA ANAK
•Kejadian yang menyebabkan cacat total tetap terjadi setelah peserta terdaftar dalam
Program Jaminan Pensiun kurang dari 1 (satu) bulan.
•Meninggal dunia dengan kepesertaan kurang dari 1 (satu) tahun.
MANFAAT PENSIUN •Pemberi kerja dan peserta rutin membayar iuran dengan density rate kurang dari 80%.
ORANG TUA

Formula manfaat = Akumulasi iuran + Hasil Pengembangan

Formula manfaat = 1% x masa iur (dibagi 12 bulan) x rata-rata upah tertimbang

1. Dalam perhitungan iuran dan manfaat Jaminan Pensiun, diatur ketentuan batas atas upah
2. Pada tahun 2015, batas atas upah sebesar Rp.7 juta
3. Pada tahun 2015, usia pensiun adalah 56, kemudian sejak tahun 2019 usia pensiun naik menjadi 57, dan setiap 3 tahun usia pensiun naik 1 tahun
4. TK Asing tidak diatur dalam PP 45 Tahun 2015
 MANFAAT PASTI

MANFAAT BERKALA MANFAAT SEKALIGUS

Ø Masa iur program JP min 15 tahun Ø Masa iur program JP < 15 tahun
Ø Manfaat minimum Rp 300 ribu
( disesuaikan kenaikannya setiap tahun)
Ø Manfaat Maksimum Rp 3,6 juta
( disesuaikan kenaikannya setiap tahun) Formula Manfaat = Akumulasi Iuran + Hasil Pengembangan

Formula Manfaat = 1% x Masa Iur (Dibagi 12 bulan) x Rata-Rata Upah Tertimbang

 Peserta memasuki usia pensiun & tidak memenuhi masa iur min 15 tahun

Peserta mengalami cacat total tetap / meninggal dunia

bilamana :

MANFAAT o Kejadian yang menyebabkan cacat total tetap tejadi setelah

SEKALIGUS peserta tedaftar dalam Program JP < 1 bulan
o Meninggal dunia dengan kepesertaan < 1 tahun
o Pemberi kerja & peserta rutin membayar iuran dengan Density
Rate < 80%

Meninggalkan Indonesia untuk selama-lamanya dengan ketentuan memenuhi atau tidak

memenuhi masa iur 15 tahun
JHT dan JP

JHT Jaminan Pensiun

Tujuan
Tabungan dari bagian pendapatan Mengganti pendapatan bulanan
selama aktif bekerja yang untuk memastikan kehidupan
disisihkan untuk bekal memasuki dasar yang layak saat memasuki
hari tua hari tua
Pembayaran manfaat
Sekaligus / lump sum Bulanan

Besar manfaat
Akumulasi iuran ditambah hasil Dihitung dengan formula tertentu
pengembangan berdasarkan masa iur, upah selama
masa iur, dan faktor manfaat (faktor
akrual)
Mekanisme penyelenggaraan
Tabungan wajib Asuransi sosial

Risiko harapan hidup

yang semakin panjang
Ditanggung sendiri secara Ditanggung bersama secara kolektif
individual oleh peserta (pooling of risks) oleh peserta
Bentuk Program
Tabungan/provident fund Manfaat pasti
Program Details (Pension Fund)
• When eligible, the Social Security claimant receives an annuity payment, a
payment that lasts until the recipient’s death.
• The payment is a function of average indexed monthly earnings, or AIME.
• Earnings are calculated from the 35 highest years of earnings. If the claimant worked less
than 35 years, those years are treated as “0”.
• They are indexed for inflation.
• Social Security benefits are then calculated as a redistributive function of past
earnings.
• Low earners get higher relative payments, but lower absolute payments; Workers
who earn more get higher benefits
• The replacement rate is the ratio of benefits received to earnings prior to the entitling event.
• For the average earner, the Social Security replacement rate is 40%.
• For low earners, it is closer to 60%.
• For high earners, it is closer to 20%.
 Figure 1

Social Security Benefits as a Function of Earnings

For the next $2,203
in monthly earnings,
Social Security Benefits (PIA)

benefits increase by 0¢/$

$1,865.89 just 15¢ for every
$
dollar of earnings. 15¢/
For the next $3,077 in
$1,535.44 monthly earnings
beyond the initial $612,
workers receive only
32¢ in benefits per
dollar earnings. Thus, the total benefit from earning
¢ /$ $3,689 per month is $1535.44, which
32
equals 0.90*$612 + 0.32*$3,077.
Thus, a worker earning exactly $612
$550.80
per month would get 0.90*$612, or
$550.80 in monthly benefits.
/$
90¢

Workers who have $0

monthly earnings less $612 $3,689 $5,892
than $612 receive 90¢ in $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000
benefits for every $1 of
earnings. Average Indexed Monthly Earnings (AIME)
 Program Details

• How are Social Security benefits paid out?

• Individuals can receive their Primary Insurance Amount (PIA) starting at age 65, which
is the Full Benefits Age (FBA).
• One can collect benefits as early as 62, the Early Entitlement Age (EEA).
• The FBA is rising to age 67; almost all college students would need to wait until 67 to
collect the PIA.
• If one collects benefits before their FBA, the benefits are actuarially reduced. The
reduction accounts for differing years of collecting benefits and the time value of
money.
• There is a delayed retirement credit (DRC) for those who wait to collect Social Security
after the FBA.
 How Does Social Security Work Over Time?

• How does Social Security work over time?

• In contrast to private pension plans, which are funded, Social Security has
typically been unfunded.
• This means that taxes collected from a current worker go directly to current
retirees.
• This is referred to as a “Pay-As-You-Go” system.
• Indonesia initially introduced Pay-As-You-Go” system, but then apply fully
funded system.
 Why it is changed ?
• There is no guarantee with a pay-as-you-go system that future benefits will be paid
out.
• The system could go bankrupt.
• Future generations could refuse to pay to finance the system. Because of the large
fiscal imbalance in Social Security, nearly ¾ of young people today believe that the
system will not provide them with significant income in retirement.
• The scheme burdened APBN
• Unlike private pension plans, which are backed by the actual assets of the plan, the
promises of Social Security are backed by the policies of the government.
• Unfunded Social Security carries with it a legacy debt, the debt incurred by the
government because early generations received much more in benefits than they paid
in taxes.
• The return to “middle generations” depends on the rates of population and wage
growth.
 How Does Social Security Create Legacy Debt?
• Unfunded Social Security redistributes across generations:
• The first generation received a large windfall (pay first). They did not pay into the system
for much of their working lives, but received benefits over their whole retirement.
• The middle generations got a rate of return determined by wage and population growth
and also tax rate.
• They paid into the system for their entire working lives.
• The growth in the payroll tax rate has slowed.
• There has been a significant slowdown in wage growth and population growth
• The final generation was the big loser (pay last).
• For future retirees (the 2030 cohort), the outcome is the worst of all.
• Payroll taxes are not rising at all.
• Wage and population growth are slow.
• How does Social Security redistribute in practice?
• We compute Social Security Wealth (SSW), the expected Present Discounted Value (PDV) of
Social Security benefits over a person’s lifetime, minus the PDV of payroll taxes.
Table 2

Higher earners have lower

SSW.

Redistribution under Social Security for a Single Male

Earnings Level Retirees turn Retirees turn Retirees turn
65 in 1960 65 in 1995 65 in 2030
Low earner $26,100 $12,500 -$4,100
Average earner $36,500 -$5,100 -$56,200
High earner $36,800 -$37,100 -$248,500

Younger generations have

lower SSW than older
generations.
 CONSUMPTION SMOOTHING BENEFITS OF SOCIAL
SECURITY:
Rationales for Social Security
• On the surface, it is not clear why there is government involvement in
Social Security, since retirement is an anticipated event that is largely an
individual decision.
• There are a number of rationales for government involvement, however.
• First, there may be market failures in the annuities market that Social Security
solves.
• This market is subject to adverse selection, where the “high risks” are the ones who
live a long time.
• Second, paternalism comes into play: policymakers believe that individuals won’t
save enough for their own retirement.
• Burden the state budget if it is unfunded.
 Does Social Security Smooth Consumption?

• Regardless of the reason, Social Security’s existence is motivated by

consumption smoothing.
• The question then becomes does it?
• The existing evidence shows that it does help smooth consumption.
 Does Social Security Smooth Consumption?

• The evidence comes in several forms:

• Private savings behavior. Existing research suggests that each $1 of Social
Security wealth crowds out/reduce 30¢ to 40¢ of private savings.
• Consumption at retirement. A model with diminishing marginal utility would
imply smooth consumption over time. Bernheim, Skinner, and Weinberg (2001)
found that consumption falls more than 30% when individuals retire.
• Living standards of the elderly. A third piece of evidence examines the poverty
rates of the elderly. The poverty rate is defined as the number of elderly with
income less than the poverty threshold divided by the total number of elderly.
Figure 2
Figure 2

The fraction of elderly living in

poverty has fallen
dramatically over time.

Elderly Poverty Rate and SS Over Time

40 4.5

32 4.0
Poverty Rate for 65+ (%)

SS Spending (% of GDP)
24 3.5
SS Spending
16 3.0

Elderly Poverty Rate

8 2.5

0 2.0
1959 1965 1971 1977 1983 1989 1995 2001
Year
While Social Security
spending has gone up.
 SOCIAL SECURITY AND RETIREMENT:
Theory
• The design of Social Security naturally leads to the issue of whether it
encourages early retirement.
• Social Security may encourage early retirement through:
• Implicit taxation, acting as a “substitution effect.”
• Redistribution, acting as an “income effect.”
 Theory
• The “implicit tax” takes account of the fact that a worker at the early entitlement age
can choose to work another year.
• Higher implicit taxes should lead to earlier retirement.
• If so, SSW changes because:
• One more year of payroll taxes is paid.
• One year of Social Security benefits is given up.
• The benefit level goes up because of actuarial adjustment.
• The year of work usually replaces a low earnings year with a high earnings year.
• The redistributive effects were discussed early, and act as an income effect.
 Evidence

• There are three sources of evidence that suggest Social Security

encourages retirement:
• Time series evidence
• The retirement hazard rate
• International comparisons
 Evidence 1

• Figure 3 illustrates time series evidence. It shows the labor force

participation of males, plotted against Social Security spending.
• The time series for females is clouded by the general upward trend in
female labor force participation since World War II.
 Figure 3

The fraction of elderly men

While Social Security who are working has fallen
spending has gone up. dramatically.
Elderly Labor Force Participation and SS Over Time

22 4.5

20 4.0
Labor Force Participation Rate
(% of 65+ in labor force)

SS Spending (% of GDP)
18 SS Spending 3.5

16 3.0

Labor Force Participation

14 2.5

12 2.0

10 1.5
1959 1965 1971 1977 1983 1989 1995 2001
Year
 Evidence 2

• The second piece of evidence comes from examining the age pattern at
retirement.
• The retirement hazard rate is the percentage of working people who
retire at a given age.
• Figure 4 shows the results.
 Figure 4
The hazard rate spikes up
at age 62, which is also
the early entitlement age. The hazard rate falls at
SS EEA ages 63 and 64.
SS FBA
0.25
The hazard rate again
Retirement Hazard Rate

0.20 spikes at 65, the FBA.

0.15

0.10

0.05

0
55 60 62 65 70
The hazard rate is less Age
than 10% through age 61.
 Evidence 3

• The hazard rates in Figure 4 are suggestive, but not necessarily

conclusive about the impact of Social Security.
• Figure 5 shows similar hazard rates in 1960 (before the EEA), 1970, and
1980.
 Figure 5

0.20
There was no spike 1960 SS EEA
0.15
in the hazard rate in SS FBA
1960, before the 0.10
EEA was 0.05
introduced.
0
0.20
The spike grew slowly over
Retirement Hazard Rate

1970
0.15 time, after the EEA was
0.10
introduced.

0.05
0
0.20
1980
0.15

0.10

0.05
0

55 62 65 70
Age
 Evidence 3

• A third type of evidence, and perhaps most compelling, is to make

international comparisons.
• There are spikes in other countries too, at the EEA and FBA, even when
those ages differ from that in the United States.
• Figure 6 shows retirement patterns in France.
Figure 6

60% ofisthose
There an enormous
working when
spike they
in the
hazard
turn 60 rate
retireinduring
Francethe
at next
age year.
60,
0.7 which
SSis both
EEA the EEA and FBA.
& FBA

0.6
Moreover, when the “age 60”
0.5
retirement age was not an option in
Retirement Hazard Rate

0.4 France, the hazard rate was 10%.

0.3

0.2
0.1

0
-0.1
50 55 60 65 70
Age
 Evidence

• Figure 7 shows evidence from Germany, which lowered its retirement

age in the early 1970s.
Figure 7

Within 7 years,
Germany lowered
thethe
average
early age at
retirement
which individuals
age from
retire
65 had
to 60fallen
in
64
1973.63 to 58.
from

63

62
Mean Retirement Age

EEA Introduced
61 in 1973

60

59

58
1968 1972 1976 1980 1984 1988 1992
Year
 o n
li c Implicit Social Security
a ti
pp
A taxes and retirement behavior
• Finally, Gruber and Wise (1999) present data from a series of counties
on the implicit tax rates from Social Security and the decision not to
work.
• The results show a strong positive relationship between retirement rates
and tax rates.
• Figure 8 shows their results.
• In summary, the evidence suggests that Social Security systems that
penalize work beyond the retirement age have led to increased
retirements.
 Figure 8

They also have

70 Belgium
lower percentages
R2 = 0.82 of elderly working
France
Italy (high nonworking)
60 UK
Netherlands

50
Germany Other countries, like the
Spain
Canada Netherlands, Belgium, France, and
Nonworking Elderly

Italy, have high taxes.

These countries 40 US
Sweden

also have higher

percentages of 30
elderly working.
Japan
20
In nations like the -0.5 0 0.5 1.0 1.5 2.0 2.5
United States, Sweden,
Disincentive to work
and especially Japan,
there is little implicit tax.
 SOCIAL SECURITY REFORM
• The Social Security system, in its current form, is unsustainable.
• The number of elderly that need to be supported by workers continues
to grow over time.
• Three factors cause this imbalance:
• Improvements in life expectancy
• A reduction in birth rates
• The growth in wages has slowed dramatically.
 Reform Round I: The Greenspan Commission

• With impending financial problems, the Greenspan Commission in 1983

recommended a number of changes that took place:
• Speeding up increases in the payroll tax.
• Cutting benefits.
• These policy changes staved off Social Security’s financing problems to
some extent, but did not solve them.
 Incremental Reforms

• There are a number of approaches that build on the current system:

• Raise payroll taxes further: An increase from 12.4% to 14.3% solves financing
problems for the next 75 years; raising it to 15.9% solves it forever.
• Extend the base of taxable wages: Some workers are not covered by Social Security,
and would represent a net gain in the financial position of the program.
• Raise the retirement age: The FBA has not moved up in lock-step with life
expectancy.
 Fundamental Reforms

• In addition to the “incremental reforms” discussed, there are some more

fundamental reforms that have been posed as a solution to Social
Security’s financial imbalance:
• Invest the trust fund in stocks
• Privatization
 Fundamental Reforms
• Investing the trust fund in stocks–100% of the assets of the Social Security Trust
Fund are held in bonds.
• A slow investment of the trust fund in the stock market could lead to a higher rate
of return and cover half of the projected 75-year deficit.
• This runs into the problem that politicians may simply take these higher returns
and use them for government spending.
• Also, there is concern the government might abuse its position to manipulate
capital markets for its own good.
 Fundamental Reforms

• A more radical alternative is privatization–allowing individuals to invest

their payroll taxes in various assets through individually controlled
accounts.
• The capital would then truly be “off-budget” to politicians, unlike the Social
Security Trust Fund.
• It would also respect consumer sovereignty with respect to investment decisions.
• Indonesia case: reform to the funded scheme (iuran pensiun)
 Recap of Social Security
• What is Social Security and how does it work?
• Consumption smoothing benefits of Social Security
• Social Security and Retirement
• Social Security Reform