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Chapter 1: The legacy of the crisis: resilience and challenges
Table 3: Family benefits, indexation mechanism changes 2007–13
2013
Automatic indexation Automatic indexation
No indexation Discretionary indexation
(lag) (more timely)
No indexation AT, EE, LV, LU, PL, ES
Automatic indexation BE, CY*, CZ, DK, FI, HU, IT,
2007 (lag) IE LT*, NL SI
Automatic indexation FR
(more timely)
Discretionary EL BG, DE, MT, PT, SK, SE, UK
indexation
Source: MISSOC.
Notes: * adjusted in CPI increase more than 1.1.
long-term unemployed losing their enti- to other countries (European Commis- However, this was only a first step and,
tlement to benefits, but also by the phas - sion, 2013a). However, the outcome for fiscal constraints apart, it seems clear
ing-out of stimulus measures initially countries with a discretionary indexation that unemployment benefits need to
put in place to counter the crisis, and mechanism depended on the discretion- be better designed and better synchro-
by expenditure consolidation measures. ary measure adopted. In Bulgaria, for nised with the economic cycle in order
instance, family expenditure increased. to make them more counter-cyclical,
The impact of budget consolidation on while improving the use of last resort
social protection spending can be seen by However, systems schemes, and avoid possible unemploy-
comparing what happened in this reces- were not designed ment traps when the economy recovers.
sion with what had gone before. In previ - for a prolonged crisis…
ous recessions, social expenditure was While changes can be made through
still counter-cyclical after 3 years, while The crisis showed that Member States either discretionary decisions or auto-
in 2012 it continued adjusting downward with a better coverage and more ade- matic triggers (European Commission,
as the output gap deteriorated (European quate unemployment benefits achieved 2012a), Member States relied more
Commission, 2013a). Such a pro-cyclical better automatic stabilisation. However, on discretionary measures in the
adjustment of social protection clearly while these systems proved adequate first time of the recession with, for
limits its stabilisation contribution, rais- in the first phase of the crisis in sus- instance, France and Portugal extend-
ing concerns about its contribution in taining household income, they were not ing out of work benefits at the onset
case of future recessions. designed for a prolonged crisis. In some of the recession. However, some of the
Member States unemployment benefits countries most affected by the crisis,
A more detailed prior analysis (European had a low coverage, while in most they especially the Southern Member States
Commission, 2013a) shows that, while lacked automatic triggers to adapt to a with already weak safety nets, did not
the increase in unemployment expendi- prolonged crisis although discretionary significantly strengthen income sup-
ture in 2009 was driven by the increase in decision can also be made in order to port through discretionary measures
the number of unemployed, the increase make unemployment benefits more anti- (OECD, 2014c).
in family and, to a lesser extent, pension cyclical (European Commission, 2013a).
expenditure was driven by an increase In particular, the duration and the strict- Automatic triggers for unemployment
in average expenditure per (potential) ness of the eligibility criteria of unem- benefits — in particular for partial
beneficiary. This reflects the workings ployment benefits can be extended and unemployment benefits — were already
of the indexation mechanism of benefits relaxed, respectively, in order to accom- in place in some Member States (in
which tend to be based on the previous modate the more difficult labour market Luxembourg, Italy, Portugal ( )). In oth-
83
year’s rate of inflation, such that the rise conditions of recessions. Section 5.4.1 ers (e.g. Denmark) active unemployment
in family and pension benefits in 2009 illustrates the discretionary measures measures were adjusted to labour mar-
can probably be explained by the high taken by Member States over the crisis. ket conditions (OECD, 2014c). However,
inflation in 2008, even though the rate recent changes have not, in general,
of inflation in 2009 was low. … but they did not improve introduced automatic triggers which
automatic triggers in case would help enhancing the counter-
Table 3 shows that most Member States of future recessions cyclicality of unemployment benefits
did not adjust their indexation mechanism and improve their stabilisation function,
while containing expenditure in times of
for family benefits. Only Slovenia went In general, more relaxed eligibility
in this direction by replacing the annual conditions, higher replacement rate, a expansion and avoiding possible traps.
indexation with a semester indexa- longer duration of unemployment ben- It is also clear that, while discretionary
tion, while Ireland and Greece lost their efits, and last resort support such as measures can be effective, their timing is
indexation mechanism altogether. In most social assistance, seem to have worked not always optimal, underlining the case
Member States with no indexation or a better to improve the coverage of long- for a greater use of automatic triggers.
discretionary mechanism, family expendi - term unemployed (see Section 5.4.1)
ture was more stable in 2009 compared and stabilise incomes in times of crisis. ( ) Based on MISSOC.
83
71
Table 3: Family benefits, indexation mechanism changes 2007–13
2013
Automatic indexation Automatic indexation
No indexation Discretionary indexation
(lag) (more timely)
No indexation AT, EE, LV, LU, PL, ES
Automatic indexation BE, CY*, CZ, DK, FI, HU, IT,
2007 (lag) IE LT*, NL SI
Automatic indexation FR
(more timely)
Discretionary EL BG, DE, MT, PT, SK, SE, UK
indexation
Source: MISSOC.
Notes: * adjusted in CPI increase more than 1.1.
long-term unemployed losing their enti- to other countries (European Commis- However, this was only a first step and,
tlement to benefits, but also by the phas - sion, 2013a). However, the outcome for fiscal constraints apart, it seems clear
ing-out of stimulus measures initially countries with a discretionary indexation that unemployment benefits need to
put in place to counter the crisis, and mechanism depended on the discretion- be better designed and better synchro-
by expenditure consolidation measures. ary measure adopted. In Bulgaria, for nised with the economic cycle in order
instance, family expenditure increased. to make them more counter-cyclical,
The impact of budget consolidation on while improving the use of last resort
social protection spending can be seen by However, systems schemes, and avoid possible unemploy-
comparing what happened in this reces- were not designed ment traps when the economy recovers.
sion with what had gone before. In previ - for a prolonged crisis…
ous recessions, social expenditure was While changes can be made through
still counter-cyclical after 3 years, while The crisis showed that Member States either discretionary decisions or auto-
in 2012 it continued adjusting downward with a better coverage and more ade- matic triggers (European Commission,
as the output gap deteriorated (European quate unemployment benefits achieved 2012a), Member States relied more
Commission, 2013a). Such a pro-cyclical better automatic stabilisation. However, on discretionary measures in the
adjustment of social protection clearly while these systems proved adequate first time of the recession with, for
limits its stabilisation contribution, rais- in the first phase of the crisis in sus- instance, France and Portugal extend-
ing concerns about its contribution in taining household income, they were not ing out of work benefits at the onset
case of future recessions. designed for a prolonged crisis. In some of the recession. However, some of the
Member States unemployment benefits countries most affected by the crisis,
A more detailed prior analysis (European had a low coverage, while in most they especially the Southern Member States
Commission, 2013a) shows that, while lacked automatic triggers to adapt to a with already weak safety nets, did not
the increase in unemployment expendi- prolonged crisis although discretionary significantly strengthen income sup-
ture in 2009 was driven by the increase in decision can also be made in order to port through discretionary measures
the number of unemployed, the increase make unemployment benefits more anti- (OECD, 2014c).
in family and, to a lesser extent, pension cyclical (European Commission, 2013a).
expenditure was driven by an increase In particular, the duration and the strict- Automatic triggers for unemployment
in average expenditure per (potential) ness of the eligibility criteria of unem- benefits — in particular for partial
beneficiary. This reflects the workings ployment benefits can be extended and unemployment benefits — were already
of the indexation mechanism of benefits relaxed, respectively, in order to accom- in place in some Member States (in
which tend to be based on the previous modate the more difficult labour market Luxembourg, Italy, Portugal ( )). In oth-
83
year’s rate of inflation, such that the rise conditions of recessions. Section 5.4.1 ers (e.g. Denmark) active unemployment
in family and pension benefits in 2009 illustrates the discretionary measures measures were adjusted to labour mar-
can probably be explained by the high taken by Member States over the crisis. ket conditions (OECD, 2014c). However,
inflation in 2008, even though the rate recent changes have not, in general,
of inflation in 2009 was low. … but they did not improve introduced automatic triggers which
automatic triggers in case would help enhancing the counter-
Table 3 shows that most Member States of future recessions cyclicality of unemployment benefits
did not adjust their indexation mechanism and improve their stabilisation function,
while containing expenditure in times of
for family benefits. Only Slovenia went In general, more relaxed eligibility
in this direction by replacing the annual conditions, higher replacement rate, a expansion and avoiding possible traps.
indexation with a semester indexa- longer duration of unemployment ben- It is also clear that, while discretionary
tion, while Ireland and Greece lost their efits, and last resort support such as measures can be effective, their timing is
indexation mechanism altogether. In most social assistance, seem to have worked not always optimal, underlining the case
Member States with no indexation or a better to improve the coverage of long- for a greater use of automatic triggers.
discretionary mechanism, family expendi - term unemployed (see Section 5.4.1)
ture was more stable in 2009 compared and stabilise incomes in times of crisis. ( ) Based on MISSOC.
83
71
