Etla would halve the duration of earnings-related unemployment allowance
The DURATION of earnings-related unemployment allowance should be halved, suggests Etla Taloustutkimus.
Etla published a report on Tuesday, according to which cutting unemployment benefits for the most employable unemployed jobseekers would be a way to address various labor market problems in Finland.
Currently, Finns have to work for about six months to receive 18 months of daily allowance.
“If earnings security is halved to nine months or limited to one year, employment would increase by 30,000–40,000 people and the employment rate by approximately one percentage point”, comment Aki KangasharjuCEO of Etla.
Päivi PuontiThe researcher who wrote the report with Kangasharju emphasized that the proposal would decisively encourage job hunting, especially among job seekers with the best employment opportunities.
“It is important that the system encourages people to find work as soon as possible before unemployment becomes longer and job hunting becomes more difficult,” he said.
The authors admitted that reforming the unemployment insurance system has proven to be difficult, for example, because it was feared that cutting the eligibility period for unemployment insurance could contribute to the worsening of income differences. They argued that the proposal would not have such an effect because it would encourage more jobseekers to find work more quickly and prevent unemployment spells from lengthening.
Kangasharju estimates that halving the earnings-related allowance would free up public funds of around 400–600 million euros, which he believes should be invested in supporting those in work difficulties. The funds should be invested in the development of adult education, mental health services and part-time work, solving problems related to unemployment and promoting labor force mobility.
Etla said the proposal would eliminate incentive traps.
The Helsinki-based research institute estimated earlier this year that more than 136,000 people living in the country have no financial incentive to accept a job offer, as it would increase their net income by a maximum of 20 percent.
Aleksi Teivainen – HT