Research: Unemployment benefits disincentive both to work and not work ({{contentCtrl.commentsTotal}})

The Estonian Unemployment Insurance Fund office in Tartu.
The Estonian Unemployment Insurance Fund office in Tartu. Source: Aili Vahtla/ERR

The present unemployment benefits system in Estonia is too rigid, fails to take into account changes in the labor market, and neither encourages a return to work or registering as unemployed, according to a recent report quoted by Baltic News Service.

The analysis, carried out by the Praxis Center for Policy Studies on behalf of the Ministry of Social Affairs, gave the example of a person receiving an unemployment benefit, who would not be permitted to take up temporary employment, despite any help in keeping in touch with the labor market.

Praxis noted people receiving unemployment benefit should be allowed to take on on-demand employment, even if just to maintain good work culture practices and not to fall out of touch with the market.

Simultaneously receiving an unemployment benefit and wages should be permitted for a month during the whole period of unemployment, Praxis said.

Most newly-unemployed not eligible for benefits

Only a minority of newly-unemployed are eligible for benefit, with 33 percent eligible for unemployment insurance benefit and 26 percent for unemployment allowance, based on data published by the Unemployment Insurance Fund (Töötukassa), the report said.

Self-employed persons, notaries, bailiffs and freelance creative persons are amongst those uninsured against unemployment, as a result.

Praxis argued that a person's nature of work should not be relevant in assessing benefit eligibility.

Moreover, the current allowances are not an adequate safety net in staving-off poverty, Praxis found.

Figures tally with European Commission findings

According to Statistics Estonia, 52.3 percent of unemployed people live in relative poverty, and 20.9 in absolute poverty, a higher level than the EU average. The findings echo recommendations published by the European Commission Wednesday, stating that Estonia's benefits system as a whole is inadequate.

The situation sets up a vicious circle whereby, since there is little incentive to register unemployed, many of those eligible do not do so, and thus cut themselves off from the very services which should help them find work.

Unemployment benefit is currently 50 percent of a person's last remuneration level for the first 100 days, falling to 40 percent on the 101st day. Praxis favors raising the first figure to 60 percent.

The analysis also recommends increasing the minimum rate of benefits. Unemployment allowances are currently linked to the minimum wage, but should be linked to the updated minimum means of subsistence, which in 2018 would be €267 per month, Praxis finds.

In 2019, the unemployment allowance is up to €175 per month.

The duration of benefit payments should be linked to the labor market situation, the report noted, extended in inverse proportion to the healthy of the economy at the time.

(Registered) unemployment has been hovering around the five percent mark in the first half of 2019.

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Editor: Andrew Whyte

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