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Modifications to unemployment benefits system

Coins in a purse (photo is illustrative).
Coins in a purse (photo is illustrative). Source: Karin Koppel

The procedure for paying unemployment insurance benefits has changed as of June 30. The length of time an unemployed person receives unemployment benefits now depends now on the state of the labor market.

Prior to June 29, the length of unemployment benefits was determined by a certain framework, regardless of how easy or difficult it was to find employment. The benefit will now take into account the situation of the labor market.

"The previous system was simple but somewhat inflexible. During the pandemic period, it became clear that job searches were taking a lengthy time, leaving many without income," Brit Rammul, a member of the Unemployment Insurance Fund's (Töötukassa) board of directors, said.

The labor market situation will be reassessed one month before unemployment benefits expire to decide if benefits will be renewed.

"We then calculate the number of registered unemployed and compare it to the previous three and ten-year periods. And if there are considerable changes, it means it is more difficult to find jobs and an extension in unemployment benefits is necessary," Rammul explained. 

The new system for unemployment benefits will automatically adjust to the country's economic climate.

"When the economy is weaker and finding a job becomes more difficult, unemployment benefits will be automatically extended. People can then continue to search for a job that suits them while not having to worry about their financial security. When the economy is strong again and employers are in need of workers, more people will be motivated to return to the workforce," Ingrid Erm-Eks, chief of unemployment benefits and unemployment benefits at the Ministry of Social Affairs, said. 

Kaspar Oja, an economist at the Bank of Estonia (Eesti Pank), said that such a change could cushion economic cycles, but in certain circumstances it could also delay economic recovery.

"Because unemployment responds relatively slowly to other economic indicators, it is possible that unemployment is rising or has risen recently when the economy is actually recovering. Then, this measure may reduce the pressure on people to enter the labor market. However, in the situation where it is more difficult to find employment people will be receiving support for an extended period of time, which is a positive development; it will resolve a great number of social issues," Oja said.

The Unemployment Fund tells the client if the benefit period is prolonged, and the customer does not have to take any action to continue receiving benefits.

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Editor: Merili Nael, Kristina Kersa

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