At a cabinet meeting on Thursday, the government approved a proposal from the Ministry of Economic Affairs and Communications to continue changing the unemployment benefit system, which aims to make it simpler and fairer. Wallet. Photo: Aivar Aotäht / Sakala Editor: rus.postimees.ee September 20, 2024, 11:07
At a cabinet meeting on Thursday, the government approved a proposal from the Ministry of Economic Affairs and Communications to continue changing the unemployment benefit system, which aims to make it simpler and fairer.
If a mixed unemployment benefit and unemployment insurance scheme is currently in force, it will be replaced by a single unemployment insurance scheme in the future. This means that in addition to the existing unemployment benefit, the bill proposes to create a new, basic unemployment benefit, and unemployment benefit in its current form will cease to operate.
"The current unemployment benefit system was created more than 20 years ago and no longer meets the stated goals and needs of today. In addition, unemployment benefit in its current form partially serves as a subsistence benefit, and it is not advisable to maintain double benefits," said Minister of Economic Affairs and Industry Erkki Keldo.
According to him, the new unemployment insurance system will be more understandable and fair for people.
"People who have contributed to the insurance system will also receive the necessary support if they lose their job. In the new system, both benefits also take into account the economic situation, which means that if unemployment is higher, the benefits will be paid for longer. In this way, we ensure that the unemployed can cope adequately with the situation, while at the same time we do not create an unemployment trap and motivate people to return to the labour market," Keldo explained.
The change will mean that when a person loses their job, they will be paid either the current earnings-based unemployment benefit or the new basic unemployment insurance benefit (a minimum benefit with a flat rate and duration). People who have paid unemployment insurance contributions are entitled to the basic unemployment benefit, as are those entitled to earnings-based unemployment benefit.
The amount of unemployment benefit in the basic rate is linked to the minimum wage, i.e. it is 50 percent of the minimum wage of the previous calendar year. The duration of unemployment benefit payment at the basic rate will be up to 180 calendar days. In conditions of high unemployment, this period will be automatically extended by 60 days up to 240 calendar days.
The changes to the unemployment benefit system do not affect the rights of citizens to register as unemployed, receive labour market services and labour market subsidies. The changes are planned to come into force on 1 January 2026. The Ministry of Economic Affairs and Communications will submit a draft law on unemployment insurance to the government by the end of October 2024.
Estonian unions criticize plans to abolish unemployment benefits
Back in April of this year, the chair of the Estonian Trade Union Confederation (EAKL), Kaija Vask, criticised the government's austerity plan by withdrawing money from the Unemployment Insurance Fund and abolishing unemployment benefits.
"Before the new unemployment insurance law is adopted, it is important to carry out a thorough calculation in order to have a clear idea of the source of covering the future expenses of the unemployment insurance fund," Vask writes on the EAKL website. "In addition, as a representative of the employees, I can in no way support the government's plan to save 70 million euros over four years by taking this money from the unemployment insurance fund. The unemployed are in a vulnerable position due to the loss of their usual income, and reducing the state deficit at the expense of those in need has neither moral nor ethical justification."
Although the drafters of the bill acknowledge that the increase in spending will mean choices for the Unemployment Insurance Fund board – including a possible increase in the unemployment insurance tax rate – it is already clear that the government and budget drafters must go back to square one and, in discussions with partners in the social sector, find solutions for the planned reform and changes that are acceptable to all parties, Vask notes.
According to her, there is a risk that the unemployment fund will be forced to increase the unemployment insurance tax in order to cope with the new obligations. This could lead to the closure of the unemployment fund in a situation where resources are insufficient and the tax burden on workers is increasing.
According to Vask, the systems of subsistence benefits and labour market services are relatively disconnected and do not provide sufficient help in solving the problems arising from unemployment. This can leave unemployed people caught between the two systems without the help they need. After losing their job, people's incomes can fall below the subsistence minimum, and the subsistence minimum is still too low to help the unemployed out of absolute poverty. Thus, according to the Department of Statistics, the percentage of unemployed people living in absolute poverty has increased two and a half times, reaching 18 percent.
The average number of unemployment benefit recipients at the Unemployment Insurance Fund this year was 13,115 people per month, and the total amount of payments was 12.31 million euros.
“As the chairperson of EAKL, I would like to see unemployment insurance payments maintained at the current level,” Vask notes.