Unemployment benefits do not discourage job seekers from returning to work

The situation that Spain is experiencing in terms of unemployment is problematic: together with Greece, it has the highest level of unemployment among European countries (23.7% according to the latest EPA (Encuesta de Población Activa -- Labor Force Survey); one out of two young adults under the age of 25 cannot find work (52.4%); and nearly half of the unemployed receive no benefits whatsoever. "Faced with this dramatic situation, many look to the system of unemployment protection to try to determine the reasons why the percentage of the unemployed receiving no economic assistance, those who have fallen out of the system, has reached such alarming levels and to what extent receiving unemployment payments might have a negative effect on the possibility of rejoining the workforce," comments Professor Daniel Pérez del Prado, of the Work and Social Security Law area that is part of the Social and International Private Law Department of the UC3M.

These are precisely the keys to a study that was recently published by the Lex Nova publishing company. This research, which rests on legal and economic methodological bases, delves into the main problems of the Spanish system of unemployment protection: the drop in coverage, its effect on employment, its financial sustainability or its relationship with the problem of duality, in order to propose solutions that are balanced from the point of view of efficiency and equity.

Among its many conclusions, the one that stand out are those that are related to the influence that receiving benefits might have on the possibility of returning to the workforce. "It is wrong to affirm that receiving unemployment benefits removes the incentive to return to work; we have to specify in which cases. In this respect, the available data seem to demonstrate that there are different effects depending on whether the type of payment is contributive or aid subsidies, and in the second case, it depends on which type of subsidy. Furthermore, the relationship of all between these factors has to be taken into consideration," explains Daniel Pérez del Prado, whose doctoral thesis centers on the study of the unemployment protection system from a legal-economic perspective. "Contrary to what is commonly believed, the amount and generosity of the benefits are not the elements that most discourage the return to work; rather the fundamental influence would be the length of time that benefits last," he points out.

Benefits

Contributive benefits come from the social security system. The duration and amount of the payments depend on how much the recipient had contributed to the system before becoming unemployed. On the other hand, aid subsidy benefits are connected to the lack of income (for those who have used up all their contributive benefits or are otherwise ineligible for benefits). Law determines the duration and amount of these subsidies and they are usually the most meager of benefits.

According to the study, unemployment subsidies only produce a negative effect on job seeking in the case of certain long-term benefits or cases where a chain of benefits leads to a prolonged period of unemployment. "If any discouragement exists, it is related more to long-term benefits than to the amount received, a situation we can correct by applying the adequate measures in the area of active employment policies," he clarifies.

Indeed, further development of active employment policies in Spain, together with a reform in the level of assistance offered in unemployment protection, are the most important proposals for improving the system. "Although spending on unemployment has increased notably due to the huge increase in the rate of unemployment, there is no structural deficit problem in the system. If we add to this the fact that the intensity of unemployment protection is intermediate in contributive benefits, but low in the aid subsidies when compared to what is provided in other European countries, we can clearly see that it is at the aid subsidy level that we are "bleeding to death" and where we can exponentially improve the system's ability to protect," concludes the professor.