Unions demand social security increase for unemployed persons

The Union of Free Trade Unions of Slovenia has proposed that the government should amend the Law on Employment and Unemployment Insurance and the Law on Social Security in order to increase the social security of unemployed persons. The changes concern an increase in unemployment benefit payments and financial social assistance, along with other measures. The call has come in the wake of the global economic crisis and rapidly rising unemployment levels in Slovenia.

On 28 January 2009, the Union of Free Trade Unions of Slovenia (Zveza svobodnih sindikatov Slovenije, ZSSS) proposed that the Ministry of Labour, Family and Social Affairs (Ministrstvo za delo, družino in socialne zadeve, MDDSZ) should amend the Law on Employment and Unemployment Insurance (Zakon o zaposlovanju in zavarovanju za primer brezposelnosti, LEUI (313Kb PDF)) and the Law on Social Security (LSS) in order to increase social security provisions of unemployed persons.

The changes to the LEUI involve increases in unemployment benefit payments and duration, while the amendments to the LSS relate to the rise in financial social assistance and minimum wage increases.

Changes to LEUI

Article 18 of the LEUI states that:

The right to cash benefit may be claimed by an insured person whose employment contract with one or more employers lasted for at least 12 months during the last 18 months prior to its termination.

ZSSS considers that this is a tough requirement, especially for persons in fixed-term employment, many of whom are young people. For instance, if a young person is employed for a fixed term for less than 12 months (maybe for the first time) and was, before that period, unemployed for nine months, they will not be eligible for unemployment benefit payments after the expiration of their fixed-term employment contract. Therefore, ZSSS is proposing that the stipulated period of 18 months prior to termination of the employment contract be extended to 30 months.

Moreover, ZSSS is proposing that the:

• requirements for obtaining the right to benefit payments be moderated;

• period for receipt of benefit payments be lengthened;

• benefit amount be increased;

• suspension of the right to benefit payments for certain persons be abolished.

Benefit amounts

Under the LEUI, the benefit payment amounts to:

• for the first three months, 70% of the average monthly pay received by an insured person in the 12 months prior to unemployment – ZSSS is demanding that this proportion be increased to 80%;

• for the subsequent months, 60% of the average monthly pay – ZSSS has requested that this percentage be increased to 70%;

• no lower than 45.56% of the minimum wage and no higher than three times the amount of the lowest benefit thus determined – ZSSS is demanding that the minimum threshold be increased to 55.56% of the minimum wage.

In general, ZSSS is proposing that the benefit amount should be increased by 10 percentage points.

Duration of benefit

The duration of the right to the benefit payment ranges:

• from three months for insurance of one to five years – ZSSS is demanding that this period be increased to six months;

• to 24 months for insured persons older than 55 years of age and for insurance of over 25 years – ZSSS is proposing that this period be raised to 27 months.

As noted, ZSSS is also requesting that, for certain persons, suspension of the right to the benefit payments should be abolished.

Changes to LSS

The LSS regulates the financial social assistance intended to satisfy the minimum needs of people whose income is lower than the minimum wage. As at 1 July 2008, the monthly minimum wage amounted to €221.70. If a person wants to acquire the right to financial social assistance, their average monthly income over a period of three calendar months before submission of the application is taken into account and must be lower than the minimum wage.

Persons whose employment contract with one or more employers lasted for less than 12 months during the 18 months prior to its termination and who are thus not eligible for unemployment benefit payments can apply for financial social assistance. However, if these people were employed full time before becoming unemployed, they would have received at least the monthly gross minimum wage, which amounted to €589.19 (net €424.90) since 1 August 2008 (SI0811019I). Under the abovementioned requirement, these persons are not entitled to financial social assistance for two months after becoming unemployed.

For these reasons, ZSSS believes that the minimum wage is too low and should be raised to at least €300 a month.

Government reaction

The government explained that, according to its normative programme in terms of public expenditure, any budget liabilities arising from the amendment of the LEUI were already foreseen for 2009. Thus, all changes will be taken into account during the tripartite negotiations on the amended LEUI between the government and the social partners. The ZSSS proposals will be taken into consideration as much as possible during the preparation of the draft amendments to the LEUI.

Under the normative government expenditure programme, liabilities arising from amendments to the LSS are also foreseen for 2009. Going forward, the issues regulated under the LSS will be regulated through two laws – namely, the Law on Social Security Activities (LSSA) and the Law on Social Security Benefits (LSSB). For this purpose, a study will be conducted to assess the adequacy and the new amount of the minimum wage.

Rapid rise in unemployment

During the time of high economic growth and low unemployment in Slovenia, unemployed persons found it relatively easy to find a job and were unemployed for a shorter period. Low unemployment benefit payments and financial social assistance partly served as an incentive for workers to quickly find a new job. However, in the wake of the global economic crisis, the number of jobs is diminishing in Slovenia. Unemployment is rising and people are remaining unemployed for longer periods of time. Thus, more people are depending on unemployment benefit payments and financial social assistance, and for a longer period. It is not surprising therefore that ZSSS is demanding an increase in social security provisions for unemployed persons to make it possible for them to meet their basic needs.

European Commission policy response

The European Commission ‘Inventory of Member States policy responses to the crisis in the field of employment and social policies’ states that many Member States are introducing changes to the rules determining eligibility for unemployment benefits; such changes include measures similar to those proposed by ZSSS. Measures in this field tend to take two main directions: firstly, measures guaranteeing an adequate safety net for the increased number of people who will be experiencing a period of transition; and secondly, measures encouraging workers to stay in their jobs, or unemployed people to quickly return to the labour market. Some Member States – such as Finland, France and Portugal – are expanding the eligibility to full or earnings-related benefits to persons with a short employment history. Other countries – such as Portugal – are providing an allowance to compensate workers in part-time work who are seeking full-time employment, or to cover the losses of workers whose working hours have been shortened due to the crisis. Various Member States are extending either the length of benefit eligibility (Lithuania, Portugal and Romania) or the amount received (Belgium, Bulgaria, France and Portugal). Measures are also being introduced to augment the security of at-risk groups – for example, through increases to child benefits (Bulgaria and Germany) – or by extending the scope of unemployment insurance in favour of young people ending a fixed-term labour contract (France).

Recently, the European Commission issued a background note on ‘Flexicurity in times of crisis’. In this background note, as well as in the Commission’s Economic Recovery Plan (128Kb PDF), it underlines the importance of integrated flexicurity policies during the present crisis. The Commission also highlights the need to concentrate support on the most vulnerable groups in society. Among the four priorities highlighted in the Commission’s Communication for the Spring European Council – Driving European recovery (85Kb PDF), there are also ‘Measures to support the most vulnerable’: such measures include an increase in the minimum wage and extended coverage or duration of unemployment benefits.

Focus on flexicurity

ZSSS is also highlighting the importance of the flexicurity approach during the crisis. However, the federation also emphasises that it is not possible to introduce flexicurity without first strengthening the social security cover of unemployed persons. ZSSS underlines that the state has the strongest role in this respect and must provide for a suitable level of social security through legislation.

Štefan Skledar, Institute of Macroeconomic Analysis and Development

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