At the invitation of the Future of Europe Programme, researchers from the University of Amsterdam presented a new survey: Citizens are in favour of an EU-wide instrument against unemployment. The Bertelsmann Stiftung had previously calculated the macroeconomic effects of a European reinsurance scheme.
Unemployment reinsurance can serve as an "automatic stabilizer" in an economy: In times of crisis, for example, it can stabilize an economy "against the trend" by increasing expenditure (e.g., on unemployment). While social security funds assume this role in many member states, there is no such instrument at the European level. This could have a stabilising effect in the "asymmetric" crises common to the eurozone. A study published in December 2018 by Foundations’s Europe Programme was very well received by policy makers, academia and the public as it empirically corroborates the merits of reinsurance for a stable eurozone. But what do EU citizens think of such, allegedly technical, reform proposals?
This question was the subject of an event organised by the Future of Europe Programme entitled "A European unemployment re-insurance – What do European citizens really think?”. Christian Kastrop, Director of the Future of Europe Programme, welcomed the 35 guests from policymaking, think tanks and industry and then passed on to our CEO Aart de Geus. The Bertelsmann Stiftung had been working on the idea of a European unemployment insurance scheme for several years. The public discussion shifted, however, when Finance Minister Olaf Scholz proposed to create a reinsurance for the Eurozone in autumn 2018. The instrument is particularly attractive because it can lead to comparatively low transfers, but more stabilization – which was also one of the key findings of the study undertaken by the Programme Europe's Future on re-insurance.
The speakers Prof. Frank Vandenbroucke and Dr. Francesco Nicoli (both from the University of Amsterdam) presented the key findings of their study. The researchers interviewed about 20,000 citizens in 13 member states. The respondents were asked to choose between differently tailored packages of a reform towards more pan-European risk-sharing in unemployment, for example combined with a higher or constant tax burden or at the same time higher expenditure elsewhere. The central research question was whether and to what extent EU citizens would be in favour of a cross-border risk-sharing of employment shocks (and of coping with them). The result: only a small proportion of respondents would reject transfer payments and common risk-sharing in principle. Accordingly, European unemployment re-insurance would have found a majority in almost every country – especially if its introduction was accompanied by higher social expenditure, for example on education or infrastructure. The high level of approval seemed quite surprising given the often critical reporting on "transfer payments".
After the presentation, Isabell Hoffmann and Dominic Ponattu (Bertelsmann Stiftung, Programme Europe's Future) as well as Lucas Guttenberg (Jacques Delors Institute Berlin) discussed the study’s results and dealt with commonalities and differences to their respective work focus. Afterwards the plenum took part. The importance to differentiate between the actual needs and views of citizens on the one side and the often emotionally charged public debate on reforms in the EU on the other side was strongly emphasised. It also highlighted the importance of investment, education and social affairs for citizens, which should be promoted alongside instruments to stabilise the euro area. Framing is also of great importance – in this case regarding the presentation of reform packages when questioning citizens and the translation of concepts in the political debate. The role of framing became particularly clear in the Brexit campaign in 2016. According to the participants, politicians bear a great responsibility here when disseminating policy proposals.
German summary and slides (english):
The study "An Unemployment Re-Insurance Scheme for the Eurozone? Stabilizing and Redistributive Effects" simulated the impact of a re-insurance scheme that supports national unemployment insurances in the euro area for the period from 2000 to 2016. The analysis was carried out by the ifo Institute on behalf of Bertelsmann Stiftung. The study uses Eurostat budget micro-data from the European Labour Force Survey and Community Statistics on Income and Living Conditions (EU SILC) to estimate labor market developments and the resulting income fluctuations in the current 19 euro area member states for the period 2000-2016. The simulation calculates the stabilization and distributional effects of an unemployment re-insurance scheme, assuming that it had been introduced at the beginning of 2000. The scheme requires two conditions for payments from re-insurance. First, the unemployment rate in a member state must be above the average of previous years. Second, there must be a sharp increase in the unemployment rate within a year. The study considers threshold values for the required rate of change in unemployment of one and two percentage Points.
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