Feasibility and Added Value of a European Unemployment Benefit Scheme

 

This page presents the project “Feasibility and Added Value of a European Unemployment Benefit Scheme” commissioned by the European Commission and conducted by a consortium led by CEPS. The two main outputs of the project are available here:

 

The steep rise of unemployment in Europe triggered by the recent crisis dramatically affected the lives of millions of European citizens, and in particular those in the South (see graph). This surge has called into question the strength of the Economic and Monetary Union (EMU). Traditional stabilisation mechanisms proved to be insufficient to deal with shocks, which re-opened the debate on a supranational automatic stabiliser for Europe, to prevent economic shocks or mitigate their impact on employment and income. While most EU Member States are equipped with powerful automatic stabilisers, the EMU lacks such a mechanism.

The Five Presidents’ Report has suggested important steps towards further strengthening EMU, one of which is the introduction of a common macroeconomic-stabilisation function. The Five President’s Report does not specify the precise design of this stabiliser. It leaves this task, which requires more in-depth research, to a group of experts. One option that has been long discussed is a European unemployment benefits scheme (EUBS). Over the past two years, CEPS has been the coordinator of a large project on the “Feasibility and Added Value of a European Unemployment Benefit Scheme”.

About the project

In July 2014, the European Commission, Directorate-General for Employment, Social Affairs and Inclusion issued a call for tender entitled “Feasibility and Added Value of a European Unemployment Benefit Scheme”- as a pilot project requested by the European Parliament. The tender was awarded to a consortium led by CEPS (Jobs & Skills Unit) and further composed of Katholieke Universiteit Leuven (KUL), Eftheia, Cambridge Econometrics (Camecon), Institute for Social and Economic Research (ISER, University of Essex) and Zentrum für Europäische Wirtschaftsforschung (ZEW) (Contract VC/2015/0006). The project was launched in February 2015 and it was completed in December 2016. It benefited greatly from the discussions with the European Commission and external experts and networks.

The project features contributions from Miroslav Beblavý, Ilaria Maselli, Karolien Lenaerts, Daniel Gros, Cinzia Alcidi, Mikkel Barslund, Matthias Busse, Lars Ludolph, Gabriele Marconi and Gilles Thirion (at CEPS), Frank Vandenbroucke and Chris Luigjes (at KULeuven), Michael Coucheir, Harald Hauben and Grega Strban (at Eftheia), René Repasi (at Erasmus University of Rotterdam), Richard Lewney and Hector Pollitt (at Camecon), Xavier Jara, Holly Sutherland and Alberto Tumino (at ISER), and Mathias Dolls (at ZEW) (in collaboration with other colleagues in these institutes).

Aim and scope of the project

The objective of the project was to assess, in a comprehensive and consistent way, the feasibility and added value of a European unemployment benefits scheme (EUBS). This assessment covered the economic, legal and operational dimensions of a potential EUBS. The project considered 18 EUBS variants, which were largely specified in the Terms of Reference issued by the Directorate-General for Employment, Social Affairs and Inclusion of the European Commission. Among the variants, there are 4 equivalent and 14 genuine schemes. These 18 variants are characterised by a partially overlapping set of features, which can take different values. In fact, each individual variant is a combination of these features. More details on each of the 18 variants are presented in the project deliverables.

For each of these 18 EUBS variants, the project evaluated their added value and feasibility for each Member State, the Eurozone and the European Union as a whole. In the project, added value primarily referred to the economic impact, captured in terms of a scheme’s stabilisation capacity and redistribution effects. Feasibility concerns the legal and operational constraints and options that exist when it comes to the implementation of the scheme.

Tasks, structure and outputs of the project

The project was structured into five main tasks, which cover the EUBS from different angles. A first task was to carry out a literature review of existing realities in federations both within and outside of the EU, a review of the existing proposals for an EUBS, and an in-depth analysis of the features determining the design of a potential EUBS (i.e. the 18 variants). The second task was to investigate the legal and operational feasibility of different EUBS forms, both at the national and the European level. Feasibility was assessed in terms of compatibility with national legislation and practices and with the EU legal framework. The third task was to assess the value-added of each of the 18 EUBS, in terms of stabilisation and social outcomes, through micro-economic and macro-economic simulations. These analyses cover the individual Member States, the EU level and the level of EMU. The two remaining tasks consisted of consultations with representatives of the Member States and independent experts, and the organisation of a high-level conference where the main findings of the project were presented and debated.

The outputs of these tasks can be found on the website of the European Commission via the links provided below. Note that these works have been prepared as part of the research project “Feasibility and Added Value of a European Unemployment Benefit Scheme” (contract VC/2015/0006). They were prepared at the request of the European Commission, but reflect the views only of the authors, and the Commission cannot be held responsible for any use that may be made of the information contained therein. The content of this study does not reflect the official opinion of the European Union. 

Synthesis report and executive summary of the project

The findings obtained within the project are summarised in a synthesis report, which is available below (along with its accompanying executive summary, which is also available in French and German).

Task 1: “Examination of different possible options for the scope and design of the scheme”

The first task of the project is dedicated to the scope and design of an EUBS. It comprises three sub-tasks. Task 1A presents an analysis of the incidence of (institutional) moral hazard in multi-tiered unemployment insurance systems in countries in- and outside of the EU. It further examined the solutions that have been put forward to address this issue. Task 1B reviewed existing proposals for a common unemployment insurance in Europe and situated them in a much larger literature on supranational automatic stabilisation mechanisms. Task 1C covered the policy design of the 18 EUBS variants.

Task 2: “Study of the feasibility of the scheme”

The second task of the project was devoted to the legal and operational feasibility of an EUBS and its implementation. To this end, it contained four sub-tasks. Tasks 2A and 2B were closely related, as they dealt with legal and operational barriers and options at the Member State level. This was assessed by means of a questionnaire to be completed by national experts, which was first piloted in six countries. Task 2C covered similar issues but then from the European perspective. Task 2D aimed to present a possible implementation plan or roadmap.

Task 3: “Assessment of the European value added of the scheme”

The third task of the project concerned the added value that an EUBS could bring. It consisted of three sub-tasks. Task 3A examined the benchmark against which the impact of an EUBS should be compared, accounting for recent developments such as Banking Union and Capital Markets Union, and new economic governance. It further contained an analysis of the relation between an EUBS and labour mobility, citizens’ and markets’ confidence and structural reforms. Tasks 3B and 3C assessed the economic added value of an EUBS through backward- and forward-looking macro and micro simulations. Among the variables examined were coverage, budgetary effects, stabilisation and redistribution.

Task 4: “Consultation of experts of relevant specialist networks”

The fourth task of the project involved consultations with experts and networks to receive input and peer review the work performed. To this end, members of the consortium participated in meetings with experts and networks, e.g. the PES and FreSsco networks, and presented results at specialised conferences and workshops, e.g. annual EUROMOD conference. In addition to these consultations, a peer review process was put in place for each of the specific tasks (e.g. workshop for Task 1A, written review for Task 2B, etc.).

Task 5: “Organisation of a high-level conference”

The final task of the project was to organise a high-level conference during which the findings of the project would be presented to and discussed with an audience of academics, policy-makers, representatives from Member States, social partners and international organisations and other experts. The conference took place on 11 July 2016, in Brussels. It was co-organised by CEPS, the Slovak Presidency of the Council of the EU and the European Commission. Over 260 participants took part in the event.

The event was opened with keynote speeches by Minister Kažimír (Minister of Finance, Slovakia), CEPS Director Gros, and Commissioner Moscovici (European Commissioner for Economic and Financial Affairs, Taxation and Customs). Commissioner Thyssen (European Commissioner for Employment, Social Affairs, Skills and Labour Mobility) closed the conference with her keynote address.

The remainder of the day was split up into two parts: a policy-makers’ debate (morning) and an experts’ debate (afternoon). The first part focused on what high-level policy-makers expect from an EMU stabiliser and what the role of an EUBS could be. In the first panel, Ministers Reizniece-Ozola (Minister of Finance, Latvia) and Vieira da Silva (Minister of Labour, Solidarity and Social Security, Portugal) and Director of the French Treasury Renaud-Basso debated why EMU needs a stabiliser and what is expected from such a mechanism, touching on the conditions stipulated in the Five Presidents’ Report. The second panel looked at the concept of an EUBS in more detail, featuring interventions by Ministers Padoan (Minister of Economy and Finances, Italy) and Peeters (Minister of Employment, Economy and Consumer Affairs, Belgium) and Member of European Parliament Berès. In the second part, the EUBS was put to the test: the results from the project were presented and discussed and a last session focused on whether an EUBS could meet policy-makers’ expectations. The afternoon started with a presentation on the design of an EUBS and the 18 options examined in the study. In two parallel sessions, the results of the feasibility analysis (in legal and operational terms) and the added value (in economic and social terms) were presented and discussed. The final panel bridged the gap between the experts’ and policy-makers’ debates. It focused on whether the EUBS meets the requirements for a stabilisation mechanism and the role of the social partners.

Final Programme

Slides of the presentations delivered as part of the experts’ debate can be found below:

Other working papers based on project deliverables

Along with the project, a series of working papers was published on the websites of the European Commission and CEPS. These working papers are based on the deliverables prepared in light of the project.

Other studies on a European unemployment benefits scheme or related topics

Besides the papers and reports prepared for the project, there is a range of other work on the topic of a European unemployment benefits scheme that was prepared prior to the start of the project or after it was concluded. These studies can be found below: