Government to rationalize unemployment benefits funding sources

Government plans to rationalize the unemployment benefits system so that the sole source of those benefits will be the Unemployment Insurance Fund (Töötukassa) will save the state around €70 million over four years, ETV news show "Aktuaalne kaamera" (AK) reported.
The reforms would remove what is argued to be duplication in the system, where the unemployed also receive benefits which are funded by the state but do not depend on contributions, as well as potentially eliminating those benefits funded by local government.
The Unemployment Insurance Fund is financed by employer and employee contributions.
The change would lead to a proportionate rise in expenses to the fund which could potentially be passed on in higher required contributions.
Ulla Saar, deputy secretary general for employment at the Ministry of Economic Affairs and Communications, told AK: "At present we have an unemployment allowance system paid from the state budget plus also social aid to those in need paid via local government."
"These are in essence twin social aid schemes which are very similar. It is neither effective nor sensible for the state to maintain two similar schemes," Saar went on.
Meelis Paavel, head of the Unemployment Insurance Fund, opposed a hike in the contribution rate, however.
He said: "Personally, I would not support an increase in the unemployment insurance premium rate."
"The [state] budget would become out of balance, and the deficit would deepen in the coming years. /.../ Any solution will be used to finance this scheme or new situation is a matter which needs to be discussed," Paavel added
Proponents say the change would save the state €11 million next year and up to €60 million over the following three years.
At the same time, the costs of unemployment insurance to the Unemployment Insurance Fund would rise first to €23 million, and then to €47 million, while social aid expenses would rise by €1 million and €1.7 million respectively, next year, and the following three years.
Another change would mean individuals could also receive benefits if they were to leave their job voluntarily, AK reported.
Representing employees, the Trade Unions' Confederation (Ametiühingute keskliit) said it believes that the situation for individuals who become unemployed will not worsen as a result of the planned reforms.
"It would actually becomes clearer," Jaan-Hendrik Toomel, the confederation's policy secretary, told AK.
"Indeed, discussions are ongoing about how to proceed from this point. Currently, there are still people who would pay into the unemployment insurance but are not covered by its benefits," he said.
"From the perspective of workers and/or trade unions, it should be the case that everyone who contributes to the system has the right to benefit from that system, while other measures could indeed be placed under social aid," Toomel went on.
Currently, those who become unemployed can receive both unemployment insurance benefits and unemployment allowances.
In order to qualify for insurance benefits, a 1.6 percent insurance premium is deducted from base wages, with the amount of benefit relating to that wage.
However, the state-provided unemployment allowance of €362 per month does not require individual insurance contributions.
According to a draft law prepared by the Ministry of Economic Affairs, only the unemployment contributory insurance would remain.
Those who have not paid unemployment insurance premiums for a six-month period, would move into the social assistance bracket.
Ulla Saar of the economic affairs ministry said: "The number of applicants for social aid may very well rise as a result of this reform, but the state will also allocate funds to that end."
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Editor: Andrew Whyte, Merili Nael
Source: 'Aktuaalne kaamera,' reporter Toomas Pott.