Estimating the Effect of Potential Unemployment Insurance Reforms

The federal government discussed a reform of the unemployment insurance law. To support political decision-making on reform options and for documentation purposes in the legislative process, numerous scenarios for a new regulation of unemployment benefit entitlements were simulated, as specified by the Federal Ministry of Labour and Economy. These, however, did not represent a final reform concept. The main variants propose a declining net replacement rate of unemployment benefit (70 percent for the first 10 or 12 weeks) combined with a waiting period (7 or 10 days), the abolition of the supplementary amount and an increase in the family supplement (doubling or tripling). One variant includes a reduction in unemployment assistance to a net replacement rate of 50 percent. Without accounting for behavioural responses, this results in a change in unemployment benefits expenditure from –2.1 to +0.6 percent. A potential waiting period without benefits at the start of unemployment reduces the annual average number of beneficiaries by 1.9 to 2.7 percent. The abolition of the supplementary amount, as discussed in the main variants, significantly lowers the average benefit amount, and cannot be offset for many recipients, even by increasing the family supplement. The main variants have a notably more adverse effect on the benefit levels for women compared to men. Even in the scenario with a tripling of the family supplement, single parents frequently face particularly high daily rate losses. Individuals with only compulsory schooling, health-related placement restrictions, or disabilities also often receive lower benefit amounts than under the current system on an above-average basis.