Unemployment fund chief: Current fund won't see us through major crisis ({{commentsTotal}})

Peep Peterson.
Peep Peterson. Source: Siim Lõvi/ERR

Peep Peterson, member of the board of the Estonian Unemployment Insurance Fund (EUIF) and head of the Estonian Trade Union Confederation (EAKL), has said that the current unemployment insurance fund reserve, which stands at over €800 million, would be wholly depleted in the next major economic crisis as things stand right now. As a result the unemployment insurance contribution percentage cannot be lowered over the next four years, he says.

The EUIF has thus proposed that the government leave the unemployment insurance contribution rate unchanged over the next four years, at its present figure of 2.4%, 1.6% of which is payable by the employee and 0.8% by the employer, as reported on ERR's radio news.

The EUIF's funds are projected to reach €812 million by the end of next year.

Peep Peterson admitted that tax reductions had been under discussion, but the the EUIF's board finally decided against doing so.

Promises of reform need to become reality

In fact, Mr. Peterson went further in his appraisal of the current situation in the EUIF: "Today, unemployment insurance is helping too few people, and is in urgent need of reform, not least because different political parties ‒ Social Democrats, the Centre Party, the Reform Party ‒ have each already confirmed that such a reform is planned,'' he said.

''Therein lies the reason why we have agreed this time to build up a bit of 'fat' in the unemployment insurance fund than the expected amount needed.

In June, Chancellor of Justice Ülle Madise petitioned the Riigikogu and the Minister of Health and Labour, Riina Sikkut, on the need to make the unemployment insurance system more flexible.

According to Ms. Madise, the current system leaves the majority of people who have lost their income with no means of financial support. Furthermore, inequality and, in some cases, unconstitutional situations, might be resolved if unemployment insurance benefits are viewed primarily as insurance for the loss of income earnings, she says.

Inconsistencies in the system

To return to Peep Peterson, in his view, in anticipation of a possible reform and any expansion of the circle of contributors, payments cannot be reduced right now. In fact at present only one third of people who register themselves as unemployed receive compensation from the EUIF. According to Mr. Peterson, post-reforms, this net could be spread considerably wider.

"We have a lot of work to get on top of related with atypical work contracts, which currently are under protection, but we also have many people whose seniority does not allow them to receive cover. And undoubtedly those who are coming out of work contracts should also be covered. This is this sector of society on whose behalf we would like to negotiate and who need protection," Mr. Peterson went on, forecasting that in the next 12 months the EUIF will increase its funds to the tune of €39 million.

"At the moment we are building up the reserve relatively slowly. At the same time even one billion Euros mightn't get us through a crisis of the same magnitude as the last one,'' he went on. The fact is we still need a reserve significantly more than we currently have," Mr. Peterson added.

The Ministry of Social Affairs, under whose auspices the Minister of Health and Labour falls, together with the Minister of Social Protection, is procuring analysis on unemployment reform which should be ready by March 2019, it is reported.

Editor: Andrew Whyte



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