When designing the social security for workers, it is crucial to ensure flexibility in order to provide enough incentives for people to work and at the same time ensure adequate social protection. The study looks at the Estonia’s social security system and its role in providing safe flexibility. Moreover, how much does the system promote the safe flexibility conception and what can be improved.
Three goals are important to keep in mind when developing a social security system:
- support people with low income;
- motivate working;
- keep the expenses low for taxpayers.
The study’s first part gives an overview of social security’s different tasks and the problems related. In addition, it introduces the European Commission’s indicators to measure the safe flexibility. On the basis of the aforementioned, Estonia’s social protection system is being compared to other European countries.
In the Estonia’s social security system, motivation to work is high as unemployment benefits are low and last for short durations. Higher and easily available support benefits increase the duration of unemployment and decrease employment. Lower or shorter duration unemployment benefits although pressure the pension system and favour the number of applications. Therefore, it is vital that people would get higher unemployment support and would remain in contact with the labour market, instead of falling into being the recipients of social benefits.
“The problem of Estonia’s system is that by getting bigger unemployment support the point of getting back to work step by step does not have as much benefits because in the end people lose more money“
Comparing Estonia to the other European Union countries, it could be seen that Estonia had one of the lowest costs regarding active and passive labour policies until the year 2008. Since 2008, the costs in labour policy have risen rapidly due to growth of unemployment benefits. To better measure how much of the funds make it to the unemployed, new indicators are proposed in addition to the ones proposed by the European Commission. Indicators to monitor net sums, gross sums and total costs (including social tax) between the registered unemployed people. The information could be collected by the Estonian Unemployment Insurance Fund (EUIF).
The safety of employers working with non-traditional work forms in Estonia is at an average level compared to the rest of the European Union. Below average safety exists for the self-employed and people with employment contracts. In the year 2008, unemployment support was granted to every sixth person who wished to work. This indicator was one of the lowest in the European Union.
One of the main safe flexibility output indicators is the risk of poverty between the unemployed. In Estonia the risk of falling into absolute poverty was very high before 2008, the relative risk of poverty at the same time one of the biggest in the European Union. Therefore, it could be said that unemployment is one of the biggest risks of falling into poverty as low social benefits contribute to it. This means that it is more beneficial to pay unemployment benefits to the people longer instead of letting them fall out of the labour market.
Unemployment insurance benefit on the homepage of Estonian Unemployment Insurance Fund