European citizens back unemployment reinsurance

An unemployment reinsurance scheme benefiting countries hit by asymmetric shocks attracts what to some will be surprising support across the EU.

Frank Vandenbroucke

Experts argue that European Monetary Union (EMU) has to be completed by ‘automatic fiscal stabilisers’. Welfare states have built-in stabilisers which cushion economic shocks—unemployment benefits, for instance, support the purchasing power of people who lose their jobs and so sustain effective demand. The argument about EMU is that a monetary union needs mechanisms to buttress or complement the automatic stabilisers of its member states. One option would be reinsurance of national unemployment-benefit schemes at the eurozone level.

But are EU citizens ready to share the risk of unemployment crises hitting their countries? Listening to the political debate, one might think that in such countries as Germany, the Netherlands, Finland and so on most citizens are very wary of such an idea, if not totally opposed.

To test this, a survey was organized in 13 member states embracing 70 per cent of the EU’s population, involving 19,641 respondents. Our results show that fundamental opposition to the cross-border sharing of unemployment risks is confined to less than 13 per cent of the population.

That is good news. But is there enough support to rally positive majorities for European solidarity—when economic shocks make it necessary—in all member states? That question cannot be answered on the basis of very general and vague proposals: solidarity can be secured in many different ways.

Indeed, a great variety of detailed policy proposals have been launched over the last few years, all aimed at implementing, in one way or another, the cross-border sharing of unemployment risks. Our survey was designed to take that large diversity into account and to present it to citizens of all strata of the population in a comprehensible way.

The core idea in all the policy variants we tested is that a new European policy would support unemployment benefits in countries that are in need, due to a significant increase in unemployment. But, building on that core idea, we tested many different concrete policy packages.

Generous Europeans

Our results show that citizens are indeed sensitive to the way in which risk-sharing is organised, although this sensitivity differs across countries. They generally tend to prefer packages which are more generous, with a larger European subsidy and, thus, a higher guaranteed minimum unemployment benefit; which require countries to offer education and training to all their unemployed citizens; which entail no tax increases, and which require individual beneficiaries to fulfil at least some conditions (such as to accept a suitable job offer).

Generous packages can carry majorities in each of the countries in our sample—even if a generous package might hypothetically require additional taxation. In some countries, domestic redistribution of the eventual tax burden (if there were such an additional burden) would be necessary to rally sufficient support. In most countries, support is larger if the practical implementation of such solidarity is devolved from the European level—this adds to arguments that one should not try to build a truly European benefit scheme but a reinsurance scheme, which supports national benefit systems with lump-sum budgetary transfers.

In all countries, support increases if risk-sharing is associated with social investment policies—a good combination of training, education and activation. The European policy community is exercised by how tolerant such a scheme should be with regard to structural, between-country redistribution. Yet this seems less important for citizens when they express preferences. That is not to say such debates are unimportant but other issues—such as education, training and activation requirements—seem to carry more weight.

In short, the argument that citizens in richer, high-performing EU welfare states are fundamentally opposed to cross-border risk-sharing has no basis in evidence. Rather than insurmountable polarisation on the issue, we observe room for constructive democratic deliberation.