Etla halves duration of income-related unemployment benefits

Etla Economic Research suggests that the duration of income-based unemployment benefits should be halved.

Etra released a report on Tuesday that said cutting unemployment benefits for unemployed job seekers who have the best chance of finding employment would be a means to tackle various labor market problems in Finland.

Finns currently have to work for about six months to qualify for 18 months of income-based unemployment benefits.

“If earnings-related guarantees were limited by half to nine months or one year, employment would increase by 30,000 to 40,000, and the employment rate would increase by about 1 percentage point.” commented Aki KangasharjuCEO of Etra.

Paivi PuontiKangasharju and the researchers who co-authored the report stressed that the proposal would decisively boost job search, especially among job seekers with the highest job opportunities.

“It’s important that the system encourages people to find work as soon as possible before unemployment drags on and it becomes harder to find work,” she said.

The co-authors acknowledged that reforming the unemployment security system has proven difficult, for example, due to concerns that shortening the eligibility period for unemployment security could lead to worsening income inequality. They argued that the proposal would have no such impact, as more job seekers would find jobs sooner and prevent prolonged periods of unemployment.

Kangasharju calculated that halving income-related benefits would free up around €400-600 million in public funds. Funds should be invested in adult education, mental health services, part-time job development, tackling unemployment-related problems and promoting labor mobility.

Etra said the proposal would eradicate the incentive trap.

A Helsinki-based research institute estimated earlier this year that more than 136,000 people in the country have no financial incentive to accept job offers.

Alexi Teiweinen – HT Etla halves duration of income-related unemployment benefits

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