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Unemployment insurance

More than 70 per cent of workers lack unemployment protection

The recent global economic crisis has served as a stark reminder of why unemployment insurance matters. But the reality is that fewer than half of almost 200 countries monitored by the ILO offer such protection.

Analysis | 14 November 2012
GENEVA (ILO News) – More than 70 per cent of workers worldwide have no statutory access to unemployment insurance or any type of unemployment assistance, the International Labour Organization (ILO) has said.

Unemployment insurance schemes exist in 72 countries out of 198 monitored by the ILO, most of them being middle- and high-income countries.

The proportion of unemployed workers without any such income security is even higher (86 per cent) if one includes those who haven’t paid social security contributions long enough to qualify for unemployment benefits, as many unemployment insurance schemes are based on contributions.

More than 86 per cent of the almost 40 million people who dropped out of the labour market since 2008 found themselves without a regular income from one day to the other.”
“This means that more than 86 per cent of the almost 40 million people who dropped out of the labour market since 2008 found themselves without a regular income from one day to the other,” says ILO social protection expert Florence Bonnet.

Young people are particularly affected. If they become unemployed after a short period of having entered the labour market, then they might not have paid into social security long enough to qualify for unemployment benefits.

Only 16 countries provide income support for unemployed young people as first-time jobseekers.

Huge regional differences

Unemployment social security coverage varies widely between world regions.

The proportion of unemployed receiving unemployment benefits can be as high as 80 per cent or more in Western Europe, North America, and Central and Eastern Europe, while it can drop to less than 10 per cent in Africa.

It is less than 40 per cent in Latin America and the Caribbean, and less than 20 per cent in the Middle East and Asia.

In fact, these variations reflect the different shares of employees in formal employment as a proportion of the total employment.

Unemployment benefits also made it easier for unemployed workers to look for a job.”
“With higher levels of economic development, many middle-income countries have realized the need to introduce systems of unemployment protection in order to facilitate structural economic transitions and respond to shocks,” says Bonnet.

She cites the Republic of Korea as an example. The country introduced unemployment insurance in 1995, shortly before the Asian financial crisis of 1997.

“The scheme has also helped the country absorb the repercussions of the recent global economic crisis in a more systematic and effective way,” she adds.

Unemployment insurance as crisis manager

According to Bonnet, it was not only in South Korea that unemployment benefits played a key role during the crisis.

“Countries with unemployment protection and similar schemes, ideally combined with active labour market policies, have been able to react to the crisis quicker and in a more effective way than countries without such automatic stabilizers,” she explains. “Unemployment benefits also made it easier for unemployed workers to look for a job.”

In more developped countries, unemployment protection schemes helped most workers and employers adapt to the sudden drop in demand, while helping to secure incomes and maintain consumption.

Germany and Austria are good examples. They also facilitated economic recovery through a combination of social insurance and social assistance schemes.

More recently, countries such as Thailand and Viet Nam have started to provide such protection for certain groups of workers. While there is far to go in terms of stimulating global demand, the impact for workers concerned has been dramatic.

Social protection floors

In June 2012, the ILO’s International Labour Conference adopted Recommendation No. 202 concerning national floors of social protection, which calls on all ILO member countries to provide, as one of the basic social security guarantees to all in need, basic income security. The guarantee should reach at least a nationally defined minimum level for persons unable to earn sufficient income, including in particular those not able to find sufficiently paid employment. This may be provided through different means like unemployment insurance or assistance or through employment guarantees or other public employment programmes.