In Spanish there´s no literal translation for “benefits” but in Colombia there are policies and institutions that work for citizens’ welfare. But if the welfare state is a mature beast in European nations like Britain, Colombia is nurturing a new-born; and the truth is, her policies and funding remain to be decided.
Nevertheless, Colombia´s welfare system deserves attention, and demystifying. And so this article will focus on a policy at the heart of the new politics of welfare – the ‘Cajas de Compensación Familiar’ (which roughly translates as ‘Cashdesks of Family Compensation’).
The ‘Cajas de Compensación’ came into being in 1956 as a type of non-profit cooperative to which businesses are legally obliged to affiliate their workers. Business contributes 4% of its payroll to the ‘Caja de Compensación’ which in turn gives the workers subsidies in money, physical subsidies (such as food, clothes, medicine, text books, etc.), or subsidies in services (such as access to recreation facilities, holiday facilities, education scholarships, loans, and subsidised housing).
The scheme was originally obligatory only for medium-sized and large businesses, but now a business with only one employee has to affiliate its workers. And the model which was originally created for a limited number of industries, has been expanded to cover the public sector and agricultural industry.
The “cajas” are institutions that have not only survived Colombia´s economic, political and social crises of the past 50 years, but have grown and expanded into different areas of business and services.
Perhaps their longevity is down to the fact that because they are legally non-profit businesses, they are also tax exempt, which allows money to be re-invested into improved provision of services and allows many workers to access facilities that would be out of reach if they were privately owned and managed.
This is where the genius of this system lies: By being both a private but non-profit enterprise this area of social security has been protected from the worst economic downturns and has been able to maintain its service. Crucially, the cajas have also been able to direct investment according to the country’s needs without being a slave to the political compass.
As with the health service provision, by maintaining their identity as private businesses, the cajas work under a competitive framework which ensures that their services are being continuously improved and diversified.
The cajas´success has led the institutions to grow their services, with social housing provision being one the fastest growing areas. Whilst the cajas fund the construction of the housing, the government provides funding for workers who earn up to as much as four times the minimum legal monthly salary. To a worker earning the minimum monthly wage, the government will provide funding of as much as 16% of the total cost of a new house.
In 2003 the cajas were chosen to provide the unemployment subsidies introduced that year, also helping to provide financial assistance to heads of family who find themselves out of work.
This new “benefit” is imperfect, it takes on average 6 months to apply and be authorized the subsidy, the funds are finite and provided by the FONEDE (Fondo para el Fomento al Empleo y Protección del Desempleo/Fund for the Promotion of Employment and Protection for Unemployment), and it is only available to those affiliated in the past 3 years (and to a caja for at least 12 months). This leaves the long-term unemployed vulnerable and informal workers completely unable to access both the cajas and subsidies of this sort.
An unlevel playing field?
Cajas´ tax free constitution means they have been criticised for holding an unfair advantage over fully private entities when providing recreation, tourism, credit banking services. This is a clear flaw, but it would be to throw the baby out with the bath water to react by transferring the cajas´ services to the state, as some propose.
The purpose, mission and vision of the cajas is not the creation of profit but rather social welfare. And as the budgets remain independent from the national Treasury, the cajas are an efficient and successful provider of welfare.
Yes, Dignity of life is a state responsibility, but the Colombian government has been able to outsource this to its advantage. Citizen welfare is not and does not have to burden the state.
Independent from government, the cajas and their budgets have not been the pawns of political parties or politicians. Despite years of conflict and economic downturn, these services remain afloat, providing much-needed relief for employees even when the country and the state was failing.
Welfare for all?
A concern lies in accountability. In providing a multitude of services under the umbrella of the cajas, the middle class and upper working class are afforded a certain stability which those who are unemployed or informally working will not be able to achieve.
What the ‘Cajas de Compensación’ show us is that instead of a horizontal expansion of services, what is really needed is to make these services available to different sectors of the population, in other words, make their expansion vertical.
Nevertheless the use of cajas in welfare provision has been an innovative policy and one that has been sustainable and efficient.
Perhaps we are on the right path – we just need to feed a welfare system suffering from stunted growth.
Photo, ColFenalco