1. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. Is EUBS politically desirable?
8/08/2019
Is EUBS politically desirable?
Source: own elaboration, based on REScEU mass survey (Ferrera and Pellegata, 2019)

8. Is EUBS politically desirable?
8/08/2019
Is EUBS politically desirable?
Source: own elaboration, based on REScEU mass survey (Ferrera and Pellegata, 2019)

9. 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

10. European Social Observatory
8/08/2019
European Social Observatory
Authors:
Sebastiano Sabato, Francesco Corti, Bart Vanhercke and Slavina Spasova

11. 8/08/2019
Expenditure on social benefits, expenditure on unemployment-related benefits, GDP and numbers of unemployed,

12. 8/08/2019
Change in expenditure on unemployment related benefits and numbers of unemployed, %

13. Social partners’ involvement in unemployment benefit regimes in Europe
8/08/2019
Social partners’ involvement in unemployment benefit regimes in Europe

14. 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.