World ranking in Unemployment Benefit

World ranking in Unemployment Benefit replacement rates

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
Netherlands	0.7	1
Switzerland	0.687	2
Sweden	0.685	3
Portugal	0.65	4
Spain	0.635	5
Norway	0.624	6
Algeria	0.612	7
Taiwan	0.6	8
Ukraine	0.56	9
Italy	0.527	10
Denmark	0.521	11
Russia	0.505	12
Tunisia	0.5	13
Finland	0.494	14
France	0.479	15
Bulgaria	0.473	16
Canada	0.459	17
Romania	0.45	18
Hong Kong	0.41	19
Austria	0.398	20
Belgium	0.373	21
Argentina	0.354	22
Germany	0.353	23
Greece	0.346	24
Azerbaijan	0.338	25
Egypt	0.329	26
Venezuela	0.325	27
Belarus	0.313	28
Israel	0.307	29
Japan	0.289	30
United States	0.275	31
Kyrgyzstan	0.255	32
New Zealand	0.254	33
Latvia	0.253	34
India	0.25	38
Korea, South	0.25	37
Uruguay	0.25	36
Uzbekistan	0.25	35
Ireland	0.238	39
Hungary	0.235	40
Poland	0.226	41
Czech Republic	0.225	42
Australia	0.21	43
Turkey	0.206	44
Albania	0.202	45
United Kingdom	0.189	46
Brazil	0.152	47
Estonia	0.132	48
Lithuania	0.117	49
Chile	0.115	50
Georgia	0.09	51

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.