EUROPEAN COMMISSION EUROSTAT Directorate F: Social statistics Unit F-5: Education, health and social protection Luxembourg, 17 March 2017 DOC SP-2017-07-Annex 1 https://circabc.europa.eu/w/browse/26803710-8227-45b9-8c56-6595574a4499 ESSPROS Expert Group (1486): https://circabc.europa.eu/w/browse/96adef83-8ee4-4c76-8c37-83502f932ec9 Working Group Social Protection statistics 4-5 April 2017 Dissemination: Proposed article on Unemployment related benefits Item 7 of the Agenda Meeting of the Working Group Social Protection statistics Luxembourg, 4-5 April 2017 BECH Building Room Quetelet
INTRODUCTION This document provides a draft statistics explained article that Eurostat would like to publish during the coming year, to present data for the unemployment function. The article will cover data at both general and detailed levels and inform on methodological issues that users need to be aware of. It will present data for the latest reference year as well as changes over time at EU level and, where relevant and possible, at country level. The data used in this draft outline were downloaded from Eurobase on the 25 th January 2017, at which point 2014 data were not yet available for Serbia and Turkey. Data will be updated before publication. The Working Group is requested to provide comments on the proposed analysis. The article will be revised accordingly before its publication planned in June 2017. The Working Group will be consulted on the results before it is released. SOCIAL PROTECTION STATISTICS UNEMPLOYMENT BENEFITS 1. Introduction Social protection benefits are transfers, in cash or in kind, made to relieve households and individuals of the burden of one or more social risks or needs. This article presents statistics on social protection benefits intended to address the risks and needs associated with unemployment. The data are collected annually through the European system of integrated social protection statistics (ESSPROS). 2. Main statistical findings 2.1 Unemployment related expenditure in 2014 In 2014, the EU-28 as a whole spent 198 325 million EUR on unemployment related benefits, amounting to 1.4% of GDP. The level of spending varied between Member States, ranging from over 2.5% of GDP in Belgium, Spain, Ireland and Finland to less than 0.3% in the Poland and Romania (see Figure 1). In non-eu countries (IS, NO and CH), the amounts spent stood between 0.5% and 1% of GDP. Figure 1 - Expenditure on unemployment related benefits (%GDP), 2014 (1) (1) Data for RS and TR are not available. Eurostat (online data code: spr_exp_sum) 2
Expenditure on unemployment related benefits at EU level amounted to 5.1% of expenditure on social benefits. The relative importance of this expenditure varied between Member States, accounting for more than 10% of total expenditure on social benefits in Ireland, Belgium and Spain but less than 3% in Hungary, the United Kingdom, Poland and Romania (see Figure 2). In non-eu countries, the share of unemployment related benefits ranged from 3.6% in Switzerland to 2.3% in Norway. However, the proportion of social benefit expenditure allocated to unemployment does not necessarily provide a particularly useful basis for comparison between countries because it is not only linked to the relative generosity of the system but also to the numbers of unemployed and incidences of redundancy. Figure 2 - Expenditure on unemployment related benefits (% of expenditure on social benefits), 2014 (1) (1) Data for RS and TR are not available. Eurostat (online data code: spr_exp_sum) A more meaningful comparison of expenditure on unemployment related benefits may therefore be to consider expenditure per unemployed person (according to the ILO definition 1 ). The comparison is made in purchasing power standard (PPS) to eliminate price differentials (see Figure 3). Expenditure on unemployment related benefits in 2014 amounted to just over 7 994 PPS per unemployed person at EU level but varied considerably across countries. The amount spent was exceptionally high in the case of Luxembourg (over 33 000 PPS). Elsewhere in the EU, amounts spent in 2013 ranged from more than 28 813 PPS per unemployed in Belgium to 690 PPS per unemployed in Romania. Meanwhile, among non-eu countries the figures ranged from 14 347 PPS in Norway to 8 734 PPS in Iceland. Users need to be aware that the figures may still not provide the best basis for comparison between countries because the expenditure may include amounts paid out to persons who are employed. For example, partial unemployment benefits are paid to employees of enterprises implementing reduced working time or temporary suspension of work due to economic or other difficulties. 1 People who are without work, currently available for work and seeking work. See https://stats.oecd.org/glossary/detail.asp?id=2791 3
Figure 3 - Expenditure on unemployment related benefits per unemployed person (PPS (1) (2) and EUR), 2013 (1) Data for CH, RS and TR are not available. (2) Expenditure per person unemployed is derived using an annual average of numbers of persons unemployed according to ILO definitions. Eurostat (online data codes: spr_exp_sum, une_rt_a) Some methodological issues that need to be taken into account when comparing data on unemployment related benefits between countries include: o Registered unemployed: Access to certain types of unemployment related benefit is often conditional on being registered as unemployed with the public employment services (PES). The above comparison of expenditure per unemployed person (see Figure 3) is based on data from the EU Labour Force Survey 2 on numbers of unemployed according to the ILO definition, which refers to people who are without work, currently available for work and actively seeking work. Such figures are unlikely to correspond with numbers of persons actually registered as unemployed with the PES as not all individuals who are ILO unemployed register and some individuals who are not ILO unemployed may be able to register as unemployed with the PES. As a result, expenditure per person in unemployment may not reflect the expenditure per person registered as unemployed with the PES and potentially able to access unemployment related benefits. Indeed, the difference in expenditure per head using the two different denominators is quite significant in some countries (see Figure 4). For example, expenditure per registered unemployed is noticeably lower in countries such as Austria, Finland and Ireland but higher in countries such as Denmark, Malta and Estonia. 2 See http://ec.europa.eu/eurostat/web/lfs/statistics-illustrated 4
Figure 4 - Expenditure on unemployment related benefits per person unemployed and (1) (2) (3) per person registered unemployed (PPS), 2014 (1) Data for CH, RS and TR are not available. (2) Data in PPS per registered unemployed not available for EU-28, CY, UK and IS. (3) Expenditure per person unemployed is derived using an annual average of numbers of persons unemployed according to ILO definitions. Expenditure per person registered unemployed is derived using an annual stock of persons registered as unemployed with the PES. Eurostat (online data codes: spr_exp_sum, une_rt_a, lmp_rjru) o Structure of unemployment: Certain unemployment related benefits are provided only for a limited duration. For example, it is common for registered unemployed, if they meet specific requirements (primarily related to contributions), to first receive unemployment insurance benefits for a limited period after which they may claim either an unemployment assistance benefit or a minimum income allowance. The former can often be less generous than unemployment benefits while the latter not only provides a lower level of benefits but is usually excluded from the expenditure on unemployment benefit and is instead reported in the expenditure on social exclusion 3. Further, the initial period during which unemployed can claim unemployment benefits varies between countries. Indeed, in some countries unemployment benefit is only paid for a relatively short period after which unemployed may only receive a minimum income allowance. The implication of this is that expenditure per person unemployed is also impacted by the structure of unemployment in terms of the distribution between short-term unemployed who are more likely to receive more generous unemployment benefits reported in the unemployment function and long-term unemployed who are more likely to receive either less generous unemployment benefits or minimum income allowance which is not included in the expenditure on unemployment related benefits. o Family/children supplements: In principle, supplements for dependent children granted with respect to unemployment related benefits should be split off and reported separately the family/children function. However, this is often difficult in practice so that the value of such supplements remains in the unemployment function. As a result, countries that implement a universally available family allowance and do not use supplements may appear to have a lower expenditure on unemployment related benefits than countries 3 Minimum income allowance is reported in the expenditure on social exclusion in ESSPROS rather than that on unemployment unless specific provisions are made for unemployed. 5
which implement a more restricted family allowance and rely on supplements to top up the income of families confronted by unemployment. o Benefits provided through the fiscal system: With the exception of payable tax credits, unemployment related benefits provided through the fiscal system are not taken into account in the data. For example, tax exemption, tax credits and higher tax free allowances provided to the unemployed may reduce taxes paid by recipients but are not taken into account in the expenditure recorded by the ESSPROS core system. 2.2 Unemployment expenditure between 2000 and 2014 EU expenditure on unemployment related benefits (in constant prices) rose by 14.9% between 2000 and 2014 (see Figure 4Error! Reference source not found.) and therefore did not keep up with the increase in numbers of persons unemployed, which rose by 25.6%. The increase in unemployment related expenditure is less than half of that for all social benefits (34.0%) but similar to the growth in GDP (18.0%) over the same period. This meant that the share of social benefit expenditure associated with unemployment fell from 6.9% to 4.8% over the period. Indeed, its contribution declined every year between 2001 and 2014 with the sole exception of 2009 when the economic crisis hit and GDP in constant prices declined 4.4%. Figure 5 Expenditure on social benefits, expenditure on unemployment related benefits, GDP and population under 18, (constant prices, index 2000=100) EU-28, 2000-2014 (1) (1) EU-28 figures exclude data for BG and HR to ensure that data have the same coverage of countries throughout the time-series. In 2014 these two countries contributed less than half a percent of total EU expenditure on unemployment. Eurostat (online data codes: spr_exp_fun, spr_exp_sum, une_rt_a, nama_10_gdp) The increase in expenditure on unemployment was underpinned by increases in two thirds (seventeen of the twenty-six) Member States for which data are available. In fact, increases of more than 50% over the period 2000 to 2014 were observed in ten countries EE, IE, EL, ES, IT, CY, LT, LU, MT and PT (see Figure 6). 6
Figure 6 - Change in expenditure on unemployment related benefits and numbers of unemployed, (% change between 2000 and 2014) (1) (1) Data for BG and HR are not available. (2) Data are provisional. Source: Eurostat (online data codes: spr_exp_fun, nama_10_gdp, une_rt_a) However, the overall change between 2000 and 2014 hides important fluctuations in expenditure during that period (see Error! Reference source not found.). For the large part the fluctuations in expenditure on unemployment related benefits between 2000 and 2014 follow changes in the numbers of unemployed. This is primarily due to the fact that the majority of unemployment related expenditure relates to unemployment benefits received by unemployed. However, between 2009 and 2013 opposing trends can be observed as expenditure on unemployment related benefits declined 14.1% while numbers of unemployed rose 15.1%. There may be several reasons for this. First, unemployment benefits, which constitute the majority of unemployment related expenditure, usually become less generous as the duration of an unemployment spell increases. Between 2009 and 2013, numbers of long-term unemployed grew while numbers of short term unemployed fell such that the proportion of registered unemployed who were long-term unemployed increased from 33.3% to 47.3% 4, likely shifting the structure of unemployed towards a higher proportion with fewer rights to unemployment benefit. Second, redundancy compensation is not strictly linked with unemployment but if a person does become unemployed as a result of redundancy the compensation can be expected to be granted before or soon after becoming unemployed. For this reason, expenditure on redundancy compensation is likely to correlate with inflows into unemployment but not with total numbers in unemployment, particularly when the proportion of long-term unemployed is high. Third, policies may have been 4 LFS - Eurostat (online data code: lfsa_upgan) 7
introduced to reduce government spending on unemployment related benefits in response to the sovereign debt crisis. 2.3 Composition of unemployment expenditure in 2014 2.3.1 Distribution by type of benefit Just over three quarters (77.5%) of expenditure on unemployment related benefits at EU level was disbursed in the form of periodic cash benefits, 16.4% as lump-sum cash benefits and just 6.1% as benefits in kind (see Figure 7). Periodic cash benefits constituted the majority of expenditure on unemployment related benefits in all but two EU Member States Greece and Cyprus where lump-sum cash benefits were more important. Benefits in kind, which includes, for example, vocational training for the unemployed and placement services, accounted for less than 20% of expenditure on unemployment in all but six countries Denmark (21.6%), Estonia (27.3%), Malta (25.5%), Austria (23.5%), Sweden (25.1%) and the United Kingdom (25.8%). Among non-eu countries, periodic cash benefits were the main component of expenditure on unemployment in Switzerland, Iceland and Norway. Norway was the only case in which benefits in kind accounted for more than 20% of expenditure on unemployment (30.1%), exceeding the level observed in any of the Member States. Figure 7 - Expenditure on unemployment related benefits by type (% of expenditure on unemployment related benefits), 2014 (1) (1) Data for RS and TR not available. Eurostat (online data code: spr_exp_fun) 2.3.2 Distribution by detailed benefit type ESSPROS distinguishes five types of periodic cash benefits (see Figure 8): (1) Full unemployment benefits, (2) Partial unemployment benefits, (3) Early retirement benefits for labour market reasons, (4) Vocational training allowance and (5) Other cash benefits. Full unemployment benefits are by far the most important type, accounting for almost two thirds (64.1%) of expenditure on unemployment related benefits, thus explaining why periodic cash benefits are the most important form of disbursement. Indeed, full unemployment benefits are the most important type of benefit in all but four of the Member States (EL, CY, LU and HU). Other cash benefits account for the largest portion of expenditure on unemployment in 8
both Luxembourg and Hungary. In the former, this is associated with a series of labour market measures which serve to (re-)integrate individuals into work while in the latter this expenditure relates primarily to a minimum income support benefit for unemployed whose unemployment benefit has elapsed. Similarly, ESSPROS distinguishes three types of lump sum cash benefits: (1) Vocational training allowance, (2) Redundancy compensation, (3) Other cash benefits. Redundancy compensation, which accounts for 14.0% of expenditure, is the most important type of lump sum benefit and the second most important unemployment related benefit after full unemployment benefits. Redundancy compensation accounts for the largest portion of expenditure on unemployment in both Greece and Cyprus even exceeding that on full unemployment benefits. Other types of lump sum benefits are relatively unimportant, accounting for under 2.5% of expenditure on unemployment. Lastly, benefits in kind can be broken down into four detailed benefit types (1) Mobility and resettlement benefits, (2) Vocational training, (3) Placement services and job search assistance and (4) Other benefits in kind. None of these are particularly important in terms of expenditure on unemployment. Expenditure on vocational training accounts for 3.8% of expenditure while all remaining categories each account for less than 1.5%. Figure 8 - Expenditure on unemployment related benefits by detailed benefit type (% of expenditure on unemployment related benefits), EU-28, 2014 Eurostat (online data codes: spr_exp_fun) 2.4 Composition of unemployment expenditure between 2000 and 2014 2.4.1. Distribution by type of benefit At EU level, expenditure on unemployment related benefits at market prices increased for all forms of disbursement over the 2000-2014 period. However, when measured in constant prices (see Figure 9), expenditure rose for periodic cash benefits (9.6%) and lump-sum cash benefits (79.2%) but declined for benefits in kind (-14.9%). This meant that the contribution of lump-sum cash benefits rose over the period (from 10.5% to 16.4%) while the contribution of periodic cash benefits and benefits in kind declined (from 9
81.2% to 77.4% and from 8.3% to 6.1% respectively). In fact, the increased expenditure on lump-sum cash benefits accounted for 56.1% of the rise in unemployment related benefits between 2000 and 2014. Expenditure on lump-sum cash benefits followed a completely different tend to other types of benefit. This is because the amounts concerned are relatively small in many, but not all, countries and changes in benefits in countries where they are relatively important can have an important impact. Expenditure on lump sum benefits rose each year between 2000 and 2009 reaching a peak 151.2% higher than in 2000. Subsequently it declined each year between 2009 and 2014, ending at 79.2% above the 2000 level. Surprisingly, the largest annual increase occurred between 2006 and 2007 (42.9%), surpassing that observed as the economic crisis struck between 2008 and 2009 (20.3%). This unexpected rise is in fact due to a break in the series in the data for Italy. Severance pay (Trattamento di fine rapporto) is reported in the old age function between 2000 and 2006 but between 2007 and 2014 it is reported in the unemployment function and accounts for, on average, 30.5% of expenditure on unemployment related lump sum benefits (at market prices) during that period 5. Figure 9 - Expenditure on unemployment related benefits by type of disbursement (constant prices, index 2000=100), EU-28, 2000-2014 (1) (1) EU-28 figures exclude data for BG and HR to ensure that data have the same coverage of countries throughout the time-series. In 2014 these two countries contributed less than half a percent of total EU expenditure on unemployment related benefits. Eurostat (online data codes: spr_exp_fun, nama_10_gdp) 2.4.2. Distribution by detailed benefit type Expenditure at EU level increased between 2000 and 2014 for five of the twelve detailed types of unemployment related benefits (see Table 1) full unemployment benefits (31.3%), partial unemployment benefits (99.4%), redundancy compensation (77.5%) 6, other lump-sum benefits (99.4%) and other benefits in kind (103.5%). Increases in the first three types are expected as the economic crisis brought increases in the numbers of unemployed, persons whose working time had been temporarily suspended or reduced and workers affected by redundancies. Indeed, important increases in expenditure at 5 Severance pay (Trattamento di fine rapporto) should also be reported in the unemployment function between 2000 and 2006 but limitations in source data used to compile the statistics prevent this. 6 The increase in expenditure on redundancy compensation reported here is liable to be overstated due to the above-mentioned break in the series for severance pay (Trattamento di fine rapporto) in Italy. 10
EU level were observed between 2008 and 2009 for all three of the categories associated with these groups - full unemployment benefits (36.1%), partial unemployment benefits (271.9%) and redundancy compensation (20.9%). This trend held in the vast majority of the Member States where such benefits exist. Since 2009, expenditure on each of these types of benefit has declined but remains well above levels observed in 2000. Interestingly, expenditure on partial unemployment benefits and redundancy compensation both declined quite dramatically between 2009 and 2010 while expenditure on unemployment remained stable. This is likely related to the fact that these benefits tend to be of a short-term nature, so increased levels of expenditure on these types of benefits seldom persist for long after the initial shocks caused by the economic crises. The overall increase in expenditure on unemployment related benefits between 2000 and 2014 was primarily driven by rises in expenditure on full unemployment benefits and redundancy compensation, while much smaller contributions were made by partial unemployment benefits, other lump-sum benefits and other benefits in kind. Expenditure at EU level declined between 2000 and 2014 for the seven remaining detailed types of unemployment related benefits (see Table 1) early retirement for labour market reasons (49.6%), Periodic and lump sum vocational training allowance (-59.7% and -58.1% respectively), Other periodic benefits (-1.5%), Mobility and resettlement benefits (-19.3%), Vocational training (-23.4%) and Placement services and job search assistance (-9.8%). The decline in expenditure on early retirement benefits for labour market reasons is not unexpected since European employment policy is strongly focused on extending working lives and encouraging older workers to remain active in the labour market rather than facilitating their premature withdrawal. Early retirement benefits are therefore out of line with policy objectives and are generally being used less. Indeed, expenditure on such early retirement benefits fell in two thirds of Member States where such benefits exist. However, the most dramatic decline in expenditure (in absolute terms) concerned vocational training allowances provided in the form of periodic cash benefits which fell by 59.7%. The vast majority of this decline is associated with a reduction in expenditure in Germany where expenditure on such allowances fell by almost 90% over the period. 11
Table 1 - Expenditure on unemployment related benefits by type (market prices, constant prices and % unemployment related benefits), EU-28, 2000 and 2014 (1) EUR millions (market prices) EUR millions (constant prices) % of unemployment related benefits 2000 2014 % Change 2000 2014 % Change 2000 2014 Total 139 754 197 898 41.6 161 120 185 094 14.9 100.0 100.0 Periodic cash benefits 113 452 153 238 35.1 130 797 143 323 9.6 81.2 77.4 Full unemployment benefits 78 326 126 801 61.9 90 300 118 596 31.3 56.0 64.1 Partial unemployment 2 195 5 397 145.8 2 531 5 048 99.4 1.6 2.7 Early retirement benefit for labour market reasons 8 508 5 290-37.8 9 809 4 948-49.6 6.1 2.7 Vocational training allowance 19 362 9 609-50.4 22 322 8 987-59.7 13.9 4.9 Other periodic benefits 5 061 6 141 21.4 5 834 5 744-1.5 3.6 3.1 Lump sum cash benefits 14 714 32 508 120.9 16 963 30 405 79.2 10.5 16.4 Vocational training allowance 126 65-48.4 145 61-58.1 0.1 0.0 Redundancy compensation 12 632 27 636 118.8 14 563 25 848 77.5 9.0 14.0 Other lump sum benefits 1 956 4 808 145.8 2 255 4 497 99.4 1.4 2.4 Benefits in kind 11 589 12 152 4.9 13 360 11 365-14.9 8.3 6.1 Mobility and resettlement 861 856-0.6 993 801-19.3 0.6 0.4 Vocational training 7 916 7 470-5.6 9 127 6 987-23.4 5.7 3.8 Placement services and job search assistance 2 310 2 568 11.2 2 663 2 402-9.8 1.7 1.3 Other benefits in kind 501 1 257 150.8 578 1 176 103.5 0.4 0.6 (1) EU-28 figures exclude data for BG and HR to ensure that data for 2000 and 2013 have the same coverage of countries. In 2043 these two countries contributed less than half a percent of total EU expenditure on unemployment related benefits but their exclusion in this table means that the data are slightly different from those presented in Figure 6. Eurostat (online data code: spr_exp_fun, nama_10_gdp) Figure 10 - Expenditure on unemployment related benefits by detailed benefit type and numbers of unemployed (constant prices, index 2000=100), EU-28, 2000-2013 (1) Expenditure on unemployment related benefits by detailed benefit type Numbers unemployed (1) EU-28 figures exclude data for BG and HR to ensure that data have the same coverage of countries throughout the time-series. In 2014 these two countries contributed less than half a percent of total EU expenditure on unemployment related benefits. Source: Eurostat (online data code: spr_exp_fun, une_rt_a) 12