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3 November 2015

Towards a desirable and feasible European unemployment benefit scheme

unemployment benefits monthly forum

During the last ETUI Monthly Forum, Ilaria Maselli, Research Fellow at CEPS, and Frank Vandenbroucke, of the Catholic University of Leuven, discussed the added value of a European unemployment benefit scheme. They presented a preliminary assessment of a research project funded by the European Commission which studies the feasibility and desirability of establishing a European unemployment benefit scheme (EUBS).

The notion of a European unemployment benefit scheme has been present in the debate since the 1970, though not until after 2012 did the economic rationale shift towards proposing it as an automatic stabiliser for the euro area and the European Union. According to Ms Maselli, the EUBS is desirable in Europe for several reasons. First, in Europe monetary policies are managed at EU level and fiscal policies are limited to the national level. Secondly, member states have reduced powers to adjust to spillover effects. Finally, the only real stabiliser available in Europe is mobility, which, though increasing, remains still limited in terms of numbers and the impact it can generate.

The research shows that in many of the case studies identified (USA, Canada, Australia, Germany, Switzerland, Belgium and Austria), unemployment benefits are centralised while active labour policies and social assistance are decentralised. Dr Vandenbroucke referred to the question of the institutional moral hazard which occurs when the central higher level covers the unemployment benefits, and the regional or local level can influence and, by the same token, be held responsible for the level of unemployment. According to Dr Vandenbroucke, the institutional moral hazard at EU level would be ‘the price to be paid’ for better risk pooling and stabilisation in Europe. To avoid having countries that are net beneficiaries of the system in the long run, Dr Vandenbroucke proposed to impose ‘minimum requirements’ to trigger the EUBS.

Ronald Janssen, ETUC policy advisor, expressed concern about the view that would regard trade union and workers’ rights as a problem of ‘moral hazard’ standing in the way of a European unemployment benefit system. He also stressed that the problem with European Monetary Union is not just how to deal with temporary cyclical shocks; it is also, he pointed out, of a ‘structural’ nature, with economies that are fundamentally different belonging to a single monetary union. To address all these issues, the ETUC is keen to support a broad-based European investment plan that would simultaneously boost recovery and help the different Member States to upgrade their economies.

Finally, some comments were made objecting that long-term unemployment cannot be dealt with exclusively via an unemployment benefit scheme, and proposing a more integrated approach. The preliminary assessment presented by the speakers nonetheless opened up a lively debate on the feasibility and desirability of establishing an unemployment benefit scheme at EU level. It is a debate that will undoubtedly continue.

Further reading:

  • Download the first paper of the project here.
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