Trade unions protest against changes in unemployment insurance provision

On 23 September 2010, trade unions held a rally to protest against a government proposal to finance labour market services and benefits from unemployment insurance premiums and not from the state budget. They claim that, under a tripartite agreement from 2008, the proposal should first have been discussed with the social partners. Despite trade union opposition, the legislation was passed. It was expected to take effect on 1 January 2011.

Background

Unemployment insurance premiums in Estonia are regulated by the Unemployment Insurance Act and represent 2.8% of the wages for employees and 1.4% of the payroll for employers (EE0908019I). The financial resources collected from employers and employees are used by the Estonian Unemployment Insurance Fund (Eesti Töötukassa) to pay different unemployment benefits.

The fund also provides various labour market services to those looking for work. These services are currently financed from the state budget and the European Social Fund (ESF). However, ESF resources for 2007–2013 are running out in Estonia, forcing the government to find alternatives to finance labour market services.

Bill to change unemployment insurance provision

The government decided to change the use of unemployment insurance premiums and proposed that they should in future also be used to finance labour market services. The government suggested that unemployment insurance premiums could be collected in a new, separate endowment, which would be complemented by resources from the state budget.

According to the draft act, the endowment will be created in 2011 out of unemployment insurance premiums. Initially, EEK 112 million (about €7 million) from unemployment insurance premiums and EEK 66 million (about €4 million) from the state budget would be fed into the endowment. Subsequently, the government would decide each year the share of unemployment insurance premiums to be allocated to the endowment.

Reactions from social partners

Trade unions strongly oppose the government’s proposals. The Estonian Trade Union Confederation (EAKL) argued that, under a tripartite agreement made in April 2008, the necessary resources for providing labour market services would be taken from the state budget once ESF resources ran out. So, according to EAKL, a new approach to financing labour market measures should first have been discussed with the social partners.

On 23 September 2010, EAKL organised a small rally in front of the main government building to protest against the proposal. But despite the rally and the trade unions’ opposition, the government approved the draft act on the same day with an effective date for the changes of 1 January 2011.

EAKL is also concerned that the new act will give the government excessive powers to make decisions about use of resources from the Unemployment Insurance Fund and has put forward two proposals:

  • a special fund for training unemployed people created and financed by taxation of employers;
  • an income tax for enterprises to finance the labour market services.

The Estonian Employers’ Confederation (ETTK) agreed with the government proposal as this would make the use of resources more flexible than the present situation. However, ETTK considers the employment programme, to be drawn up within the framework of the new financing measures, should be put together by the Unemployment Insurance Fund with its tripartite supervisory board. According to the draft act, the fund’s supervisory board only has the right to express its opinion on the employment programme to the Minister of Social Affairs.

Commentary

Although the government has confirmed the draft act, members of the Social Affairs Committee (Sotsiaalkomisjon) in the parliament (Riigikogu) are not unanimous on the subject and are considering alternatives.

Some members believe that:

  • labour market services should be financed from the state budget;
  • taxes should be raised in case the state budget does not cover the necessary resources.

Others have expressed the view that a tax increase would only hamper the financial climate. Thus, discussions about the draft act continued in late 2010.

Liina Osila and Kirsti Nurmela, PRAXIS Centre for Policy Studies

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