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Feasibility and Added Value of a European Unemployment Benefit Scheme Feasibility and Added Value of a European Unemployment Benefit Scheme Main findings from a comprehensive research project Written by Miroslav Beblavý and Karolien Lenaerts, in close collaboration with the consortium. January – 2017 Social Europe EUROPEAN COMMISSION Directorate-General for Employment, Social Affairs and Inclusion Directorate A — Employment & Social Governance Unit A4 — Thematic analysis Contact: Eric Meyermans E-mail: [email protected] European Commission B-1049 Brussels EUROPEAN COMMISSION Feasibility and Added Value of a European Unemployment Benefit Scheme Main findings from a comprehensive research project European Commission Directorate-General for Employment Social Affairs and Inclusion Directorate Employment & Social Governance EUROPEAN COMMISSION This synthesis report constitutes a deliverable prepared in light of the research project “Feasibility and Added Value of a European Unemployment Benefit Scheme”, commissioned by the European Commission, Directorate-General for Employment, Social Affairs and Inclusion and initiated by the European Parliament. It was prepared by Miroslav Beblavý and Karolien Lenaerts at CEPS, in close collaboration with the consortium partners. The authors are grateful for the feedback and inputs of the consortium partners and of the European Commission. The authors would like to thank Ilaria Maselli for her important contribution to the project. The usual disclaimers apply. CEPS Centre for European Policy Studies Place du Congrès 1 ▪ B-1000 Brussels Tel: +32 (0)2 229 39 35 www.ceps.eu Contact: Miroslav Beblavý and Karolien Lenaerts E-mail: [email protected] and [email protected] Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): 00 800 6 7 8 9 10 11 (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE This report was written as the synthesis report for the research project ‘Feasibility and Added Value of a European Unemployment Benefit Scheme’ (contract VC/2015/0006). The research project is undertaken by a consortium comprising the following institutions: the Centre for European Policy Studies (CEPS), the Centre for European Economic Research (ZEW), the Institute for Social and Economic Research (ISER), Cambridge Econometrics (CamEcon), EFTHEIA and the University of Leuven (KUL); we use ‘the Consortium’ as a shortcut throughout this paper. This document has been prepared for the European Commission, however, it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. More information on the European Union is available on the Internet (http://www.europa.eu). Luxembourg: Publications Office of the European Union, 2017 ISBN: 978-92-79-64969-1 doi: 10.2767/86782 © European Union, 2017 Reproduction is authorised provided the source is acknowledged. European Commission Directorate-General for Employment Social Affairs and Inclusion Directorate Employment & Social Governance Feasibility and Added Value of a European Unemployment Benefit Scheme Table of Contents INTRODUCTION .......................................................................................................... 9 CHAPTER 1. A EUROPEAN UNEMPLOYMENT BENEFITS SCHEME AS A STABILISATION INSTRUMENT: WHY THE EMU NEEDS A STABILISER AND COULD THE SCHEME MEET THESE OBJECTIVES? .......................................................................................... 11 1.1. Rationale for a supranational automatic stabiliser for the EMU ......................... 12 1.1.1 Building blocks of the EMU ................................................................. 12 1.1.2 Incompleteness of the EMU ................................................................ 13 1.1.3 A common fiscal-stabilisation function for the EMU ................................ 15 1.2. Would this stabiliser complement or substitute for market mechanisms and other policy instruments that already exist or are being implemented? ............. 16 1.3. An EUBS as a stabilisation instrument .......................................................... 18 CHAPTER 2. KEY FEATURES AND POLICY CHOICES INVOLVED IN A POTENTIAL EUBS ......... 20 2.1 The 18 EUBS variants examined in this study ................................................... 21 2.2. Would it be best to implement an EUBS as a genuine European insurance scheme or through reinsurance of national funds? ..................................................... 23 2.3. Functions of an EUBS ................................................................................... 25 2.4. Financing of an EUBS ................................................................................... 27 2.5. Benefits of an EUBS ..................................................................................... 27 2.5.1 Benefits of the genuine variants .......................................................... 27 2.5.2 Benefits of the equivalent variants ...................................................... 29 2.6. The issue of permanent transfers ................................................................... 31 2.7. Moral hazard in an EUBS .............................................................................. 33 2.7.1 The issue of institutional moral hazard ................................................. 33 2.7.2 How can moral hazard be addressed? .................................................. 34 2.8. Debt-issuing in an EUBS ............................................................................... 35 CHAPTER 3. THE ADDED VALUE OF A POTENTIAL EUBS .................................................. 37 3.1 An EUBS could contribute to macroeconomic stabilisation ................................... 39 3.1.1 Enhancing the national unemployment benefits schemes? ...................... 40 3.1.2 How much stabilisation could an EUBS achieve and at what cost? ............ 41 3.1.3 Temporary and permanent transfers in an EUBS ................................... 51 3.2 An EUBS could contribute to labour mobility ..................................................... 53 3.3 An EUBS could contribute to Social Europe ....................................................... 54 CHAPTER 4. IMPLEMENTATION OF A POTENTIAL EUBS ................................................... 57 4.1. Constraints and options under European law ................................................... 59 4.1.1. Legal base for payments under an EUBS ............................................. 60 4.1.2. Legal base for establishing the financing of an EUBS ............................. 65 4.2. Constraints and options at the Member State level ........................................... 66 4.2.1. Legal and operational constraints and the options for the reinsurance schemes ..................................................................................... 66 4.2.2. Legal and operational constraints and the options for genuine schemes ... 67 4.3. How could an EUBS be implemented? ............................................................. 71 4.3.1. Concepts for a roadmap .................................................................... 71 4.3.2. A theoretical roadmap for the reinsurance schemes .............................. 72 4.3.3. A theoretical roadmap for the genuine schemes ................................... 73 4.3.4. Converting a reinsurance scheme into a genuine one? ........................... 74 4.3.5. Would the EUBS start ‘blind’? ............................................................ 75 4.3.6. Changing the parameters of the EUBS after its introduction ................... 75 2017 5 Feasibility and Added Value of a European Unemployment Benefit Scheme 4.3.7. What role could the social partners have? ............................................ 77 CHAPTER 5. CONCLUSIONS FROM THE STUDY .............................................................. 78 GLOSSARY OF KEY CONCEPTS AND PROJECT TERMINOLOGY ........................................... 81 BIBLIOGRAPHY ......................................................................................................... 86 APPENDICES ............................................................................................................ 90 Appendix A: Overview of the specifications of the 18 EUBS variants as examined in this project .............................................................................................. 90 Appendix B: Methodology and data used in the modelling exercises .......................... 92 Appendix C: Overview of the legal articles taken into consideration and the conclusions reached .................................................................................. 96 2017 6 Feasibility and Added Value of a European Unemployment Benefit Scheme Table of Figures Figure 1. Comparison of coverage of NUBS (average over 1995-2013) and an EUBS in which payment begins immediately on becoming unemployed (‘V7’) ......................................... 41 Figure 2. EA19 GDP (level and growth), 1995-2013 ............................................................... 44 Figure 3. Comparison of the stabilisation impact of selected EUBS variants on EA19 GDP, (two equivalent and two genuine) if these variants had operated over 1995-2013 ..................... 44 Figure 4. Historical real GDP growth rates and stabilisation impact of selected EUBS schemes on Latvia and Slovakia, if the schemes had operated
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