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Francesco Corti, OSE and University of Milan
European Unemployment Benefit Scheme: why we need it and which are the challenges ahead Conference ‘Integrating the European Pillar of Social Rights into the roadmap for deepening Europe’s Economic and Monetary Union’ Brussels, 04 July 2019 Francesco Corti, OSE and University of Milan
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8/08/2019 Rationale of EUBS Definition: An EUBS is an supranational institutional automatic stabilization mechanism, providing temporary fiscal transfer to Member State facing sudden rise of unemployment rate. An EUBS has two main purposes: Economic: stabilize automatically the economic cycle in case of symmetric/asymmetric shocks Social: provide income support to the people most hit by the crisis
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8/08/2019 Functions of EUBS Geographical insurance: reallocation of resources across MSs within a given period. Resources pooled in a EU fund according to common rules and then redistributed. Intertemporal insurance: reallocation of resources across time. Debt issuing or going in deficit in bad times. National unemployment scheme enhancement: introduction of common minimum standards to improve their coverage and stabilization capacity
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Models of EUBS Genuine: replace national unemployment schemes
8/08/2019 Models of EUBS Genuine: replace national unemployment schemes EU fund financed by employer/employee, directly pays out to unemployed continuously More harmonisation: level of benefit (reference wage, replacement rate, cap) eligibility criteria, coverage and duration decided at EU level. Benefit can be top-up or basic. Equivalent: re-insure national unemployment scheme EU fund financed by Member State Activation on the basis of an indicator that triggers the fund automatically (e.g. stUR). Thresholds agreed by MSs Less harmonisation but need some common standards
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Challenges for a EUBS Institutional moral hazard
8/08/2019 Challenges for a EUBS Institutional moral hazard Possible solutions: Claw-back mechanism Use deviation from average short-term Unemployment Rate as trigger Fiscal rule for EUBS scheme: Annual balance/ Balanced over economic cycle/ No fiscal rule Role of social partners Different involvement of TUs across the EU in design and management of the national unemployment insurance schemes
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Challenges for a EUBS 4. Legal basis: 5. Nature of the shocks absorbed
8/08/2019 Challenges for a EUBS 4. Legal basis: Payments: Art. 352(1) Flexibility clause (unanimity vote) Financing: new budget line in EU budget or new fund outside EU budget Minimum requirements 5. Nature of the shocks absorbed All amplitudes/Only significant shocks (=set minimum activation thresholds) 6. Governance: implementation and oversight: Independent authority/Commission/Member States/social partners
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Is EUBS politically desirable?
8/08/2019 Is EUBS politically desirable? Source: own elaboration, based on REScEU mass survey (Ferrera and Pellegata, 2019)
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Is EUBS politically desirable?
8/08/2019 Is EUBS politically desirable? Source: own elaboration, based on REScEU mass survey (Ferrera and Pellegata, 2019)
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A re-insurance EUBS as a possible solution?
8/08/2019 Based on stUR triggered by significant deviation from average (2%) MSs contribute (0,1% GDP/year up to 0,5%) Fiscal rule across the economic cycle Oversight: Commission + MSs and SP Automatic activation Equivalent EUBS MSs + TUs decide how to raise contributions No-moral hazard: claw-back mechanism EUBS fund: outside EU budget
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European Social Observatory
8/08/2019 European Social Observatory Authors: Sebastiano Sabato, Francesco Corti, Bart Vanhercke and Slavina Spasova
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8/08/2019 Expenditure on social benefits, expenditure on unemployment-related benefits, GDP and numbers of unemployed,
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8/08/2019 Change in expenditure on unemployment related benefits and numbers of unemployed, %
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Social partners’ involvement in unemployment benefit regimes in Europe
8/08/2019 Social partners’ involvement in unemployment benefit regimes in Europe
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Heterogeneity of national unemployment benefit systems
8/08/2019 Heterogeneity of national unemployment benefit systems Source: The EU's Mutual Information System on Social Protection (MISSOC) comparative tables for duration and replacement rate; Bruegel calculation using Eurostat's Labour Force Survey for the coverage ratio.
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