Unemployment benefit still below ILO standard despite increase

Although unemployment benefit in Estonia is set to increase to EEK 1,000 (€ 64) per month, the rate will still remain below the requirements set by the International Labour Organisation. Unemployment benefit has remained at the same level in Estonia since 1999, despite the trade union pressure to raise the payments to meet international standards. The government’s stance is that it is more important to place the emphasis on active labour market policies.

Planned changes in benefits and subsistence minimum

The government has approved the proposal of the Minister of Social Affairs, Jaak Aab, to increase unemployment benefit to EEK 1,000 (€64) per month in 2007. The level of unemployment benefit has remained at EEK 400 (€25) since 1999.

The subsistence level will increase to EEK 900 (€57) per month in 2007; at present, it stands at EEK 750 (€48) per month. The rise in subsistence level should cover the minimum expenses for food and other goods and services. According to Statistics Estonia (Statistikaamet), in 2005, the estimated monthly subsistence minimum for a single person household was EEK 1,938 (€123), and the minimum estimated food basket was EEK 816 (€52) per month.

International requirements

Unemployment benefit in Estonia does not comply with the requirements set by the European Union and International Labour Organisation (ILO) conventions. According to the ILO Social Security (Minimum Standards) Convention of 1952 (C102), unemployment benefit should be at least half of the minimum wage. The current monthly minimum wage in Estonia is EEK 3,000 (€191); accordingly, the unemployment benefit should be at least EEK 1,500 (€95.50). However, unemployment benefit currently represents only 27% of this amount: just EEK 400 (€25).

From 2007, the unemployment benefit will reach about 67% of the proportion fixed in the ILO convention. However, negotiations are currently taking place between the Estonian social partners in order to increase the minimum wage to EEK 4,050 (€258) per month in 2007. If these negotiations are concluded, the unemployment benefit should be raised to a monthly figure of EEK 2,025 (€129), which is more than double the amount of the proposed government increase.

Moreover, the current subsistence level of €48 is not compatible with the ILO standards either. The subsistence level should be at least the same as the cost of the minimum food basket, which was €52 in 2005. At present, the subsistence level in Estonia represents 91.9% of the minimum level set by ILO conventions.

Unemployment benefit and insurance

Unemployment benefit is the main support for unemployed people who are not eligible for unemployment insurance benefit. However, unemployment benefit is only granted to unemployed people who have been employed during the previous 12 months for at least 180 days. Activities that are regarded as employment or the equivalent of employment are: working under different employment contracts, working as a self-employed person, studying full time or on army duty. The maximum period for receiving unemployment benefit is usually 270 days.

Some 71,735 persons were registered with the unemployment office during 2005, of whom 31,880 (44.4%) were men and 39,855 (55.6%) were women. A total of 31,347 (43.7%) were granted unemployment benefit, a reduction of 20.3% compared to 2004.

According to the Unemployment Insurance Fund, only 20% of newly registered unemployed people were eligible for unemployment insurance benefit. In May 2006, the eligibility rules were changed to make it possible for people experiencing unemployment repeatedly within a short time frame to receive unemployment insurance benefit. This measure should reduce the number of people receiving unemployment benefit.

Views of trade unions and government

Since 2000, the Confederation of Estonian Trade Unions (Eesti Ametiühingute Keskliit, EAKL) has made several attempts to increase the level of unemployment benefit. Although an increase will apply from January 2007, EAKL is not satisfied. The unemployment benefit still remains below the standards set by ILO conventions. EAKL has always based its proposals on the ILO conventions but it also states that Estonia should not set a target of establishing mere minimum standards.

However, the government has not prioritised unemployment benefit in its agenda since it focuses instead on active labour market policies. It fears that increasing the unemployment benefit may encourage people not to go back to work.

EAKL is the main driving force behind the amendments to unemployment benefit that will come into force on 1 January 2007; many of the changes had been proposed as far back as 2004.

Marre Karu and Kirsti Nurmela, Praxis Centre for Policy Studies