Unemployment Insurance Reform In Eastern Europe

1
Unemployment Insurance Reform In Eastern Europe

• Gina Lewis
• March 10, 2005

2
Outline

• Eastern Europe
• Countries
• History
• What is Unemployment Insurance?
• Comparisons
• Poland UI
• Hungary UI
• Czech Republic UI
• Conclusion

3
Eastern Europe

• Includes Bulgaria, Croatia, Czech Republic,
  Hungary, Moldova, Poland, Romania, Slovakia,
  Slovenia, Yugoslavia.

4
Unemployment Insurance

• A social insurance program that provides
  unemployment compensation for a limited period to
  involuntarily unemployed workers.

5
Something to Ponder

• 75 of 150 million people unemployed worldwide to
  not benefit from any unemployment insurance
  protection according to the International Labor
  Office
• Richest countries reduced protection since the
  1990s

6
Eastern Europe and UI

• Unemployment was virtually unknown prior to
  collapse of State-controlled economies in 1989.
  
  
• In early transition years, regions began to aid
  those who were out of work
  
• Unemployment began to rise which led to stricter
  eligibility rules , lower levels of replacement,
  shorter duration of benefits and lower
  beneficiary rates

7
History/Background

• In the early 1990s, reforms began to improve
  unemployment insurance, health care, pensions
  etc. as a need for social programs was
  emphasized
• Eastern Europeans were experiencing deterioration
  in living conditions
  
• Eastern Europes social assistance programs were
  not unknown, but needed to be reorganized to cope
  with economic transition.

8
History/Background

• Initially, unemployment benefits were generous
  and duration was 2 years or longer!
  
• Today, less generous due to financial strain and
  duration does not exceed 12 months
  
• For example Polands replacement rates went from
  79 in 1991 to 48 in 1993 and Hungarys dropped
  from around 80 to 40.
  

9

• POLAND
• Population is 38.6 million
• Labor force is 16.92 million
• Unemployment rate is 20 (2003)
• HUNGARY
• Population is approx. 10 million
• Labor force is 4.164 million
• Unemployment rate is 5.9 (2003)
• CZECH REPUBLIC
• Population is 10.3 million
• Labor force is 5.25 million
• Unemployment rate is 9.9 (2003)

10
Conditions for Receipt of UI

• POLAND
• Registered as unemployed
• Able and ready to work full time
• Between 18 and Retirement (60 for women/65 for
  men)
  
• Minimum of 180 days worked in past year
• HUNGARY
• Under 60 for men and 55 for women
• Actively searching for a job
• At least one year of insured work in last 4
  years
  
• CZECH REPUBLIC
• No age conditions established
• At least one year of work in the past 3 years

11
Calculation of Benefits

• POLAND
• Receive 36 of the national average wage from
  previous year
  
• HUNGARY
• Receive percentage of average gross earnings from
  the past four quarters. Divided into 2 phases
  each 3 months long. Phase 1 receives 75 and
  Phase 2 receives 60
• CZECH REPUBLIC
• Receive 60 in the first three months and 50 in
  following three months of last earned net income.
  Maximum benefits not to exceed 1.5 times minimum
  wage.

12
UI Young People

• POLAND
• School leavers can receive 28 of the national
  average wage in the past quarter for a maximum of
  9 months
  
• HUNGARY
• School leavers can receive 75 of the minimum
  wage for a maximum of 6 months.
  
• CZECH REPUBLIC
• There are no special conditions

13
UI Older People

• POLAND
• Workers within 2 yrs of retirement (60 for women
  and 65 men) are eligible if they hold a work
  record of at least 30 yrs for women and 35 for
  men.
• They receive 52 of the national average wage
  until they reach retirement age
  
• HUNGARY
• No special treatment/conditions
• CZECH REPUBLIC
• Benefits are paid to worker until they reach
  average retirement age which is 57.5 years old.
  Then the worker may receive pension.

14
Unemployment Assistance

• Unemployment assistance is available to those who
  do not qualify for UI or have reached the maximum
  duration and can no longer receive UI
  
• Unemployment assistance does not exist in Poland,
  Hungary or Czech Republic
  

15
Conclusion

• Since the 1990s, Eastern Europe, including
  Poland, Hungary, and the Czech Republic, have
  began reforming unemployment insurance.
  
• Like all transitions, there have been advances
  and set backs but progress has been made and will
  continue.
  
• Goal keep involuntary unemployed to a minimum
  and aid those until they regain employment.

16
Conclusion

• Poland is the most advanced of the three
  countries in outlining and organizing UI.
  However, Polands unemployment rate is twice that
  of Hungarys and 4 times that of the Czech
  Republic!
• Hungary should consider setting up special
  conditions with respect to their older
  population.
  
• Czech Republic should consider setting up special
  conditions for its younger generation.