2015年-CEPS欧洲政策研究中心_Reinsurance_of_National_Unemployment_Benefit_Schemes_34页_5mb

Summary of "Reinsurance of National Unemployment Benefit Schemes"

Core Content

This document explores the feasibility of introducing a reinsurance mechanism for national unemployment benefit schemes within the EU, proposing an alternative to the full Europeanisation of such systems. The study draws on the experiences of the United States and Switzerland to develop a model for a European Unemployment Insurance (EUI) system that could provide significant stabilisation during major economic shocks, while avoiding the inefficiencies of a system designed to absorb minor national shocks.

Main Objectives

• To assess the theoretical and practical aspects of a reinsurance mechanism for unemployment insurance in the EU.
• To examine the potential benefits of such a system in terms of welfare gains and macroeconomic stability.
• To provide a tangible example of how such a system could be structured and implemented.

Key Concepts

• Reinsurance Mechanism: A system where a central fund absorbs large-scale unemployment shocks, with contributions from member states based on risk assessments.
• Fiscal Shock Absorber: A tool to mitigate the impact of economic downturns on unemployment and social welfare.
• Convexity in Social Loss Functions: The idea that the social cost of unemployment shocks increases disproportionately with the size of the shock, making insurance with deductibles more efficient than proportional shock absorbers.

Main Views and Findings

1. The Swiss and US Models

• Swiss System:

  • Unemployment insurance is structured with a replacement rate of 70% of the average wage.
  • Workers with dependents receive 80%.
  • Benefits are paid daily and have a maximum duration of 260 or 400 days depending on contribution history.
  • The system is administered by the federal government (SECO) but involves significant cantonal and communal involvement.
  • Contributions are split equally between employers and employees, with a 2.2% rate up to a certain income level.
  • The fund is centrally managed and supplemented by federal loans when necessary.

• US System:

  • Federal unemployment compensation (UC) provides support for up to 26 weeks.
  • Extended benefits (EB) and Emergency Unemployment Compensation (EUC) can be activated during severe recessions.
  • The system is funded by both federal and state contributions, with the federal government covering 50% of EB and EUC.
  • Employers pay a 6% FUTA tax, but this is reduced by 5.4% for states with their own unemployment insurance systems.
  • Maximum benefit levels vary significantly by state, ranging from $133 to $625 per week.
  • The system allows for federal support during financial difficulties, with a focus on preventing free-riding and ensuring long-term sustainability.

2. Theoretical Insights

• Insurance with Deductible is Superior: According to Arrow (1974), insurance contracts with a deductible are preferred over proportional shock absorbers, especially when the expected utility is maximised.
• Convexity of Social Loss Functions: The cost of unemployment shocks is not linear but convex, meaning that larger shocks cause disproportionately higher social costs. This justifies the use of insurance mechanisms with deductibles.
• Fiscal Stabilisation: A reinsurance system could provide significant stabilisation during major economic downturns, but is not suitable for absorbing small shocks due to threshold effects.

3. Practical Design of the EUI

• Trigger Mechanism: Activation occurs only in case of major unemployment shocks.
• Claim Process: Payments are made from a central fund, with contributions based on risk assessments.
• Deductible: A key feature of the system, where a certain level of shock is not covered, ensuring that the system is not triggered for minor events.
• Payout and Pay-in: The system would pay out during major shocks and require pay-ins from member states based on their risk profile.
• Balance and Stabilisation Impact: The EUI would maintain a balance through contributions and could significantly reduce the economic and social impact of major shocks, as shown by simulations.

Key Information

• A reinsurance system for the EU could be activated 40 times during 2000-2012 had it existed.
• The Swiss model demonstrates that federal-level unemployment insurance is feasible despite cantonal variations in unemployment rates.
• The US model shows how federal support can be used to stabilise unemployment during severe recessions, while also ensuring that states remain responsible for their own systems.
• The theoretical analysis suggests that a deductible-based insurance system is more efficient than a proportional shock absorber in reducing social losses.
• The EUI proposal is based on the idea that major shocks require a centralised response, while minor shocks should be handled locally.

Recommendations

• The EU should consider implementing a reinsurance mechanism for unemployment insurance.
• The system should be designed with a deductible to avoid being triggered by minor shocks.
• The EUI should be activated only in response to major economic events, ensuring that it serves as a strong stabilisation tool.
• The system should allow for differentiated contribution rates based on country-specific risks.
• The model should incorporate elements from both the Swiss and US systems, including federal oversight, cantonal participation, and mechanisms for loan repayment and adjustment of contribution rates.

Conclusion

The reinsurance model proposed in this document offers a viable alternative to the Europeanisation of unemployment insurance schemes. It is designed to provide strong stabilisation during major shocks while avoiding the inefficiencies of a system that absorbs minor fluctuations. The study concludes that such a system could significantly enhance the resilience of the eurozone's unemployment insurance framework.