Wednesday, June 10, 2015

World ranking in Unemployment Benefit

In times of crisis, the ability of workers who lose their jobs to retain their purchasing power has important social and economic implications. A high replacement rate (ratio of unemployment benefits a worker receives relative to the worker’s last gross earning) ensures that the negative effects of rising unemployment on aggregate demand are mitigated. It also prevents workers from falling into poverty when they lose their jobs.

The table below shows the gross replacement rate in the first year of unemployment for as many countries as is available. The data is taken from a recent IMF working paper (see end of post for full reference). I have ranked countries from highest to lowest (restricting the sample to those countries which replacement rate is superior to 0). 

An interesting finding is that European countries did not have the monopoly of high replacement rates in 2000. This challenges the notion that high economic development is a necessary or sufficient condition for protection fo workers to be high. Indeed, workerswho have unemployment insurance in non-EU countries sometimes score higher. For instance, in the top 10 one finds Ukraine, Algeria, and Taiwan, while Russia, Tunisia, Romania and Hong Kong make it into the top 20.

The Anglo Saxon countries rank poorly: UK (46th), Australia (43rd) and Ireland (39th); US (31st) i.e.: coming after Venezuala, Azerbaijan, Egypt, Belarus... The picture for Eastern European countries is more mixed with Bulgaria (16th), Romania (18th), Ukraine (9th) doing okay, whereas others do not do so well: Estonia (48th), Poland (41st), Czech Republic (42nd).

Country Gross Replacement Rate, year 1  Ranking
Netherlands0.71
Switzerland0.6872
Sweden0.6853
Portugal0.654
Spain0.6355
Norway0.6246
Algeria0.6127
Taiwan0.68
Ukraine0.569
Italy0.52710
Denmark0.52111
Russia0.50512
Tunisia0.513
Finland0.49414
France0.47915
Bulgaria0.47316
Canada0.45917
Romania0.4518
Hong Kong0.4119
Austria0.39820
Belgium0.37321
Argentina0.35422
Germany0.35323
Greece0.34624
Azerbaijan0.33825
Egypt0.32926
Venezuela0.32527
Belarus0.31328
Israel0.30729
Japan0.28930
United States0.27531
Kyrgyzstan0.25532
New Zealand0.25433
Latvia0.25334
India0.2538
Korea, South0.2537
Uruguay0.2536
Uzbekistan0.2535
Ireland0.23839
Hungary0.23540
Poland0.22641
Czech Republic0.22542
Australia0.2143
Turkey0.20644
Albania0.20245
United Kingdom0.18946
Brazil0.15247
Estonia0.13248
Lithuania0.11749
Chile0.11550
Georgia0.0951

Data taken from: Mariya Aleksynska and Martin Schindler (2011) Labor Market Regulations in Low-, Middle- and High-Income Countries: A New Panel Database. IMF Working Paper.

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