Study: Benefits to end soon for thousands of people laid off by covid

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Unemployment benefits have expired or are about to expire soon for thousands of people who lost their jobs as a result of the pandemic, and in each of the coming months Estonia is set to see thousands of more people join the ranks of those who have no income at all, it appears from an analysis by the Praxis think-tank.

The study said during the crisis Estonia has focused on maintaining employment and preventing the rise in unemployment. Wage costs have been reimbursed, provided that no redundancies are made during and in the months following the payout of the compensation.

Despite the success of the measures, the number of registered unemployed has increased by 20,000 during the pandemic, Praxis said.

Merilen Laurimäe, analyst at Praxis, said one of the options for supporting the unemployed is to temporarily extend the duration of benefits by a few months.

"This has been done by a number of other European Union countries and it has been one of the most popular crisis measures alongside lump sum payments to the unemployed," Laurimäe said.

The analysis by Praxis indicates that extending the payment of the unemployment insurance benefit by three months would cost the state between €4.75 million and €6.25 million according to different scenarios, whereas extending the unemployment allowance by the same period would increase costs by approximately €1 million.

According to the study, the temporary abolition of the length of employment requirement for the payment of the unemployment allowance under the existing system would reduce the poverty of the unemployed the most, but would mean an investment of over €9 million for the state over a three-month period.

Other minimum income schemes have also been adopted in several countries. Kaupo Koppel, an analyst at Praxis, said that the aim of such schemes is to provide support to those who fall through the unemployment benefits system or for whom the period of receiving benefits comes to an end.

"Although there was a slight increase in the receipt of the subsistence allowance by households with unemployed household members in 2020, the application for the subsistence allowance rather remains low," Koppel said. According to Praxis, as a temporary crisis measure, Estonia could make subsistence allowance available to registered unemployed persons on facilitated terms or assign it to such persons automatically.

In order to prevent long-term unemployment, the think tank's analysis suggests considering also active labor market measures to encourage their wider application and the return of the unemployed to work. This may include, for example, temporary relaxation of the terms and conditions of wage subsidies, including a shorter period of time - for example, six months - for the hiring of people who have been out of work. 

The analysis by Praxis measures to support the unemployed and prevent poverty has been carried out in the context of the assessment of the economic impact related to COVID-19. The project aims to provide up-to-date and high-quality input to address the crisis caused by the coronavirus pandemic and to assess the economic impact of the measures developed to mitigate the crisis.

The survey was commissioned by the Estonian Research Council and the work was financed through the European Regional Development Fund from the Estonian Research Council's RITA program and the Estonian state budget. 

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Editor: Helen Wright

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