Association for Public Policy Analysis & Management

Panel: Improving Income Equality through a European Unemployment Insurance System

(Employment and Training)

Unemployment is a significant driver of income inequality, but its impact can be reduced by unemployment benefit systems. Both the incidence of unemployment and the coverage and generosity of unemployment insurance (UI) benefit systems vary greatly across EU member states. This policy variation helps explain income inequalities within and between EU countries, and contributes to social tensions on the continent. In European policy circles there is a growing awareness of the need to equip the European Monetary Union with a pan-European stabilization capacity to help mitigate the impact of economic shocks. Proposals currently under consideration include a European Unemployment Benefit Scheme (EUBS) to support or supplement national UI systems. An EUBS would provide Europe with a true "multi-level" way to manage the policy response to unemployment. This session examines the rationale and challenges for such an EUBS. Relevant policy issues are illuminated by aspects of multi-level UI systems in existing national systems. The four papers grow out of a project initiated by the Center for European Policy Studies (CEPS). The papers consider the incentive relations for UI programs in multi-tiered administrative and governmental arrangements in both the national and international contexts. The first paper sets the stage by explaining the context and rationale for a potential EUBS. A paper on the U.S. system highlights how a multi-level UI system operates and its implications for income inequality. The third paper describes the federal German UI system, and the lessons we can draw from it for a potential EUBS. The final paper draws on eight ase studies of countries with multi-level regulation o unemployment, and describes the overall lessons that can be learned from their experiences, notably with regard to the problem of "institutional moral hazard." Aspects of benefit generosity and coverage, the impact on inequality, incentives, moral hazard, and financing will be addressed where relevant in each paper.