Social protection statistics - unemployment benefits

Data extracted in February 2020.

Planned article update: February 2023.

Highlights

In 2017, expenditure on unemployment-related benefits in the EU-27 was EUR 174 billion, which amounted to 1.3 % when expressed relative to GDP.

In 2017, expenditure on unemployment-related benefits in the EU-27 was equivalent to 4.7 % of total expenditure on social benefits.

EU expenditure on unemployment-related benefits rose by 5.4 % between 2000 and 2017, while the total number of unemployed persons fell by 4.0 % over the same period.

Expenditure on unemployment-related benefits, 2017

Social protection benefits are transfers, in cash or in kind, made to relieve households and individuals of the burden of one or more social risks or needs. This article presents statistics on social protection benefits intended to address the risks and needs associated with unemployment. It covers not only unemployment benefits paid to unemployed persons but also other cash benefits such as partial unemployment benefits, early retirement benefits for labour market reasons, vocational training allowances and redundancy compensation, as well as benefits in kind such as mobility and resettlement benefits, vocational training, placement services and job search assistance. The data are collected annually through the European system of integrated social protection statistics (ESSPROS).

Full article

Unemployment-related expenditure in 2017

In 2017, expenditure across the EU-27 on unemployment-related benefits was EUR 174 billion, equivalent to 1.3 % of GDP. The level of spending varied between the EU Member States, ranging from 2.2 % of GDP in Finland to less than 0.5 % in Estonia, Croatia, Malta, Hungary, Poland and Romania (see Figure 1). In the non-EU countries (for which data are presented), the range for this ratio was from a high of 1.0 % in Switzerland to 0.3 % in the United Kingdom and Turkey, down to 0.1 % in North Macedonia.

Figure 1: Expenditure on unemployment-related benefits, 2017
(%, relative to GDP)
Source: Eurostat (spr_exp_sum)

Expenditure on unemployment-related benefits in the EU-27 amounted to 5.0 % of all expenditure on social benefits in 2017, with this share ranging from the 8.8 % recorded in Ireland and those of more than 7.0 % in Spain and Finland down to less than 2.0 % in Hungary, Poland and Romania (see Figure 2). Among the non-member countries, the share ranged from 3.6 % in Switzerland to 0.8 % in North Macedonia.

Figure 2: Expenditure on unemployment-related benefits, 2017
(% of total expenditure on social benefits)
Source: Eurostat (spr_exp_sum)

The proportion of social benefit expenditure allocated to unemployment does not necessarily provide an immediately useful basis for comparison between countries because of differences in the design of social protection systems. Expenditure on unemployment-related benefits is linked not only to the relative generosity of the system in terms of the types of benefits available and the level and duration of benefits provided but also to the way it is targeted and the size of the corresponding target groups.

Bearing in mind that expenditure is, at least in part, related to the number of unemployed persons, a more meaningful comparison of expenditure on unemployment-related benefits may be to consider expenditure per unemployed person (according to the ILO definition [1]). This comparison can be made in euro terms or in purchasing power standards (PPS), the latter eliminates price level differences between countries (see Figure 3).

Figure 3: Average expenditure on unemployment-related benefits, 2017
(EUR and PPS per unemployed person)
Source: Eurostat (spr_exp_sum) and (une_rt_a)

Average expenditure on unemployment-related benefits in 2017 amounted to 10 343 PPS per unemployed person across the EU-27 but varied considerably among the EU Member States. The highest expenditures per unemployed person were recorded in Luxembourg (29 416 PPS), Austria (21 830 PPS) and Belgium (21 113 PPS). In the first of these, the high result is, at least in part, linked to the fact that just over 40 % of the amount spent relates to benefits targeting unemployed persons who are not part of the denominator used to measure per capita expenditure because they are non-resident (and typically live in neighbouring countries). Similarly, in Belgium, the relatively high level of expenditure is, at least in part, linked to the payment of unemployment allowances as a “pre-pension” for people below the official retirement age who have withdrawn either fully or partially from the labour market; this group, which is also excluded from the denominator, represents 20-25 % of the regular unemployed in Belgium. Elsewhere in the EU, the expenditure ranged from just less than 19 000 PPS per unemployed person in Germany down to less than 2 000 PPS in Greece and Croatia and 571 PPS in Romania. Among the non-member countries shown in Figure 3, this ratio ranged from 12 932 PPS per unemployed person in Norway down to 1 343 PPS per unemployed person in Turkey.

As noted above for Luxembourg and Belgium, some care is required when analysing expenditure per unemployed person as the information presented may lack comparability due to differences between subpopulations receiving benefits. Indeed, as mentioned in the introduction, the unemployment function in ESSPROS covers not only unemployment benefits providing income replacement to the unemployed but also a range of other benefits targeted at wider groups, including people that may be employed. One example is partial unemployment benefits, which are paid to employees of enterprises implementing reduced working time or the temporary suspension of work due to economic, climatic or other difficulties. The data also cover benefits in kind such as placement services and job search assistance, which are usually made available to anyone seeking work (not just the unemployed), including those who are already employed and/or those who are inactive.

Some of the principal methodological issues that need to be taken into account when comparing data on unemployment-related benefits between countries include:

  • Registered unemployment: Access to certain types of unemployment-related benefit is often conditional on being registered as unemployed with the public employment services (PES). The comparison of expenditure per unemployed person (as shown in Figure 3) is based on data from the EU’s labour force survey (LFS) [2] where the number of unemployed persons is shown according to the ILO definition, which refers to people who are without work, currently available for work and actively seeking work. The population of unemployed persons measured in this way does not necessarily correspond with the count of persons registered as unemployed with the PES and therefore potentially eligible for unemployment benefits: some unemployed people following the ILO definition do not register with the PES, while some of those registered may — depending on the rules in each country — have a part-time job or not be immediately available for work and would therefore not be counted as unemployed according to the ILO definition. The extent to which these two concepts overlap depends on national (or regional) regulations establishing the criteria for registering as unemployed. As a result, indicators on expenditure can vary considerably depending on the denominator used (see Figure 4). For example, expenditure per registered unemployed person is noticeably lower (than the ILO definition) in Germany, Finland, France, Ireland, the Netherlands, Belgium, Austria and Italy, but considerably higher (than the ILO definition) in Malta and Denmark.
Figure 4: Expenditure on unemployment-related benefits by unemployment definition, 2017
(PPS per unemployed person)
Source: Eurostat (spr_exp_sum) and (une_rt_a) and Directorate-General for Employment, Social Affairs and Inclusion (online data code: lmp_rjru)
  • Structure of unemployment: Certain unemployment-related benefits are provided only for a limited duration. For example, the most generous unemployment insurance benefits (in terms of relaxed eligibility criteria and/or levels of income replacement) are usually time-limited. After exhausting their entitlement to such benefits, people that remain unemployed are typically transferred to a means-tested unemployment assistance benefit or minimum income allowance, depending on the system in each country. The former would still be recorded in ESSPROS as an unemployment-related benefit but the latter would usually be recorded as expenditure to counter the risk of social exclusion [3], immediately creating differences between countries when comparing data by function. Furthermore, the time limit for receipt of unemployment-related benefits varies between countries so the expenditure recorded as being unemployment-related (both in absolute terms and per unemployed person) is impacted not only by the design of the benefits system, but also by the structure of unemployment. Paradoxically, a country with high numbers of long-term unemployed persons could have relatively low expenditure on unemployment-related benefits, particularly when measured on a per capita basis. This issue highlights the need for better data on the numbers of recipients of unemployment-related benefits.
  • Family/children supplements: In principle, supplementary unemployment-related benefits that are granted for dependent children should be classified under the family/children function. However, this is often difficult in practice and the value of such supplements may remain as part of the unemployment function. As a result, countries that implement a universally available family allowance and do not use supplements may appear to have a lower level of expenditure on unemployment-related benefits than countries which implement a more restricted family allowance and rely on supplements to top-up the income of families confronted by unemployment.
  • Impact of the fiscal system: with the exception of payable tax credits, unemployment-related benefits that are provided through the fiscal system are not taken into account in the data presented. For example, tax exemptions, tax credits and higher tax-free allowances provided to the unemployed may reduce taxes paid by recipients but are not taken into account in the expenditure recorded by the ESSPROS core system. Similarly, taxes and social contributions deducted from unemployment-related benefits and recouped by the government are not taken into account so the gross expenditure data do not necessarily reflect the contribution of such benefits to the disposable income of beneficiaries. Indeed, expenditure net of taxes and social contributions in 2016 was more than 15 % below the level of gross expenditure in the Netherlands, Denmark, Luxembourg, Sweden, Finland and Italy (see Figure 5).
Figure 5: Expenditure on unemployment-related benefits per unemployed person, 2016
(PPS)
Source: Eurostat (spr_net_ben) and (une_rt_a)

Unemployment-related expenditure between 2000 and 2017

EU-27 (excluding Bulgaria and Croatia) expenditure on unemployment-related benefits (in constant price terms) rose by 29.7 % between 2008 and 2009 at the height of the global financial and economic crisis (see Figure 6); during the same period the number of unemployed persons increased by 27.0 %, while GDP contracted by 4.3 %. In the aftermath of the crisis, there were considerably different developments experienced: GDP increased overall by 12.6 % between 2009 and 2017, with slightly stronger annual growth rates towards the end of the period under consideration. By contrast, the total number of unemployed people rose to a peak in 2013, after which there were four successive rapid reductions such that the total number of unemployed people was 4.0 % lower in 2017 than it had been in 2000. Unemployment-related expenditure peaked in 2009 and subsequently fell at a relatively slow pace (except for a small increase in 2013). Across the EU-27 (again excluding Bulgaria and Croatia), the relative share of unemployment-related expenditure in all expenditure on social protection benefits was 6.4 % in 2000; this figure was scarcely changed by 2009 (6.5 %) although it subsequently declined to stand at 4.7 % by 2017. The relative share of unemployment-related expenditure in all expenditure on social protection benefits fell in the vast majority of the EU Member States between 2000 and 2017; the only exceptions to this rule were Italy, Luxembourg, the Baltic Member States and Austria.

Figure 6: Expenditure on social benefits, unemployment-related benefits and GDP and the number of unemployed persons, EU-27, 2000-2017
(index, 2000 = 100)
Source: Eurostat (spr_exp_sum), (nama_10_gdp) and (une_rt_a)

The number of unemployed persons followed a fluctuating development between 2000 and 2017 across the EU Member States: between these years the level of unemployment changed greatly mainly because of the global financial and economic crisis, and the subsequent recovery. Higher rates were recorded in 2017 than in 2000 in 14 Member States and lower rates in the remaining 13. In relative terms, the largest overall increase in the number of unemployed persons was recorded in Luxembourg (see Figure 7) where there was a three-fold increase, although it should be noted that Luxembourg had one of the fastest rates of population and labour force growth during the period under consideration. The overall number of unemployed persons also rose at a rapid pace in Cyprus. By contrast, the number of unemployed persons fell at a rapid rate in Poland, Czechia, Bulgaria, Lithuania, Estonia and Slovakia (note that some of these Member States were characterised by falling population numbers).

A similar analysis for the overall change in constant price expenditure on unemployment-related benefits between 2000 and 2017 reveals that the fastest growth was recorded in Estonia, Italy and Lithuania. In the case of Estonia, expenditure on unemployment-related benefits rose by 388 % (while the number of unemployed persons fell by 60 %). The increase in expenditure was mainly driven by rising expenditure for unemployment benefits (associated with two changes: on one hand, an increase in unemployment allowances, and on the other, the introduction of unemployment insurance benefits in 2002), although some of the increase could also be linked to rising expenditure for vocational training.

Figure 7: Change in expenditure on unemployment-related benefits and in the number of unemployed persons, 2000-2017
(%)
Source: Eurostat (spr_exp_sum) and (une_rt_a)

As noted above, these overall changes between 2000 and 2017 hide important fluctuations in expenditure on unemployment-related benefits during the period under consideration (see Figure 6). Generally, the largest fluctuations were recorded for the total number of unemployed persons, with unemployment-related benefits often following the same pattern; this is primarily due to the fact that the majority of unemployment-related expenditure relates to benefits that are received by the unemployed. However, in the aftermath of the global financial and economic crisis there was a marked change, as expenditure on unemployment-related benefits started to decline from 2010, while the number of unemployed persons continued to rise through to 2013. There may be several reasons for this:

  • Firstly, unemployment benefits, which constitute the majority of unemployment-related expenditure, usually become less generous (in terms of amounts paid and/or coverage) as the duration of unemployment extends. In the aftermath of the financial crisis, the share of long-term unemployment increased, thereby reducing the proportion of unemployed people who were eligible to receive full benefits.
  • Secondly, redundancy compensation is not strictly linked with unemployment but if a person does become unemployed as a result of redundancy, they may expect their compensation to be granted before, or soon after, they become unemployed. For this reason, expenditure on redundancy compensation is likely to correlate with increases in the number of unemployed persons (rather than the overall number of unemployed persons).
  • Thirdly, in a range of EU Member States, government policies were adapted in the aftermath of the crisis in order to reduce the level of government spending — this may well have impacted, at least in some Member States, on the level and/or coverage of unemployment-related benefits.

Composition of unemployment expenditure in 2017

Distribution by type of benefit

Just over three quarters (77.5 %) of expenditure on unemployment-related benefits in the EU-27 was disbursed in the form of periodic cash benefits in 2017, while 16.1 % was disbursed as lump sum cash benefits and the remaining 6.5 % as benefits in kind (see Figure 8).

Figure 8: Expenditure on unemployment-related benefits by type, 2017
(% of total expenditure on unemployment-related benefits)
Source: Eurostat (spr_exp_fun)

Periodic cash benefits constituted an absolute majority of expenditure on unemployment-related benefits in all but two of the EU Member States in 2017 — Cyprus and Lithuania — in the former, lump sum cash benefits accounted for a higher share (59.5 %), while periodic cash benefits had the highest share (45.0 %) in Lithuania without accounting for more than half of the total value of unemployment-related benefits. Benefits in kind, which include, for example, vocational training for the unemployed and placement services, accounted for less than one fifth of the total expenditure on unemployment-related benefits in all but four of the Member States, the exceptions being Estonia (30.2 %), Sweden (30.0 %), Denmark (25.8 %) and Austria (25.5 %).

Among the non-member countries (shown in Figure 8), periodic cash benefits were systematically the principal component of expenditure on unemployment-related benefits, peaking at 100.0 % in North Macedonia. In the United Kingdom and Serbia periodic cash benefits had the highest share of total expenditure on unemployment-related benefits (41.9 % and 49.4 %) but did not account for an absolute majority of expenditure.

Distribution by detailed benefit type

ESSPROS distinguishes five types of unemployment periodic cash benefits:

  1. Full unemployment benefits,
  2. Partial unemployment benefits,
  3. Early retirement benefits for labour market reasons,
  4. Vocational training allowance and
  5. Other cash benefits.

Full unemployment benefits were by far the most important type of benefit, accounting for almost two thirds (65.0 %) of expenditure on unemployment-related benefits in the EU-27 in 2017, thus explaining why periodic cash benefits were the most common form of disbursement (see Figure 9). Indeed, all but three of the EU Member States — Cyprus, Poland and Sweden — reported that full unemployment benefits were the most common form of disbursement. Among the three exceptions, early retirement benefits for labour market reasons were the most common form of disbursement in Poland, while vocational training allowances had the highest share of expenditure in Sweden (both of these are also periodic cash benefits). The most common form of disbursement in Cyprus was for redundancy compensation (a lump sum benefit).

Figure 9: Expenditure on unemployment-related benefits by detailed benefit type, EU-27, 2017
(% of total expenditure on unemployment-related benefits)
Source: Eurostat (spr_exp_fun)

ESSPROS distinguishes three types of unemployment lump sum cash benefits:

  1. Redundancy compensation,
  2. Vocational training allowance,
  3. Other cash benefits.

Redundancy compensation, which accounted for 13.3 % of total expenditure on unemployment-related benefits across the EU-27 in 2017, was the most common type of lump sum benefit and the second most important benefit (after full unemployment benefits). Other types of lump sum benefits --vocational training allowance and other lump sum cash benefits-- accounted for a relatively small share of total expenditure on unemployment-related benefits (2.7 %). Cyprus was the only EU Member State where redundancy compensation accounted for an absolute majority (54.9 %) of total expenditure on unemployment-related benefits in 2017.

Lastly, unemployment benefits in kind can be broken down into four detailed benefit types:

  1. Mobility and resettlement benefits,
  2. Vocational training,
  3. Placement services and job search assistance, and
  4. Other benefits in kind.

None of these accounted for a relevant share of total EU-27 expenditure on unemployment-related benefits in 2017; the largest was recorded for vocational training (2.8 %), while each of the remaining benefits in kind accounted for less than 2.0 % of unemployment-related benefits.

Composition of expenditure on unemployment-related benefits between 2000 and 2017

Distribution by type of benefit

EU-27 (excluding Bulgaria and Croatia) expenditure on unemployment-related benefits in current price terms was higher for all forms of disbursement in 2017 than in 2000. However, when measured in constant price terms (see Figure 10) there was a mixed picture: EU expenditure on lump sum cash benefits was twice as high in real terms in 2017 as in 2000, while there were contractions for benefits in kind (8.4 % lower) and for periodic cash benefits (3.2 % lower).

Expenditure on lump sum cash benefits in the EU-27 (excluding Bulgaria and Croatia) followed a different pattern of development to the other types of benefit; this reflects, at least in part, the relatively low level of expenditure. Real term expenditure on lump sum benefits rose every year from 2000 to 2009 (with the exceptions of 2003 and 2004) with a peak at the end of this period (when expenditure was almost three times as high as it had been in 2000 (index value of 294.5). Expenditure subsequently declined for eight consecutive years through to 2017, when it was roughly twice as high as in 2000. The largest annual increase in expenditure on lump sum cash benefits for unemployment was recorded in 2007 and may be attributed to a break in series for Italy where there was a change in the classification of severance pay (trattamento di fine rapporto); this was classified under the old-age function between 2000 and 2006 but was split between the old-age function and the unemployment function from 2007 onwards.

Figure 10: Expenditure on unemployment-related benefits by type of disbursement, EU, 2000-2017
(constant prices, index, 2000 = 100)
Source: Eurostat (spr_exp_fun) and (spr_exp_sum)

These changes in the levels of expenditure by type of disbursement have led to a shift in the composition of unemployment-related benefits between 2000 and 2017. The share of lump sum cash benefits in the EU-27 (excluding Bulgaria and Croatia) rose during the period under consideration from 8.3 % to 16.1 % (in current price terms), while the contribution of periodic cash benefits declined from 84.3 % to 77.4 % and that of benefits in kind from 7.4 % to 6.5 % (see Table 1). As the overall level of expenditure on periodic cash benefits was considerably higher, these benefits accounted for 58.4 % of the total increase in unemployment-related benefits between 2000 and 2017, while the bulk of the remaining increase could be attributed to lump sum cash benefits (37.8 % of the total increase).

Distribution by detailed benefit type

Table 1 provides an analysis of expenditure levels for 2000 and 2017 for 12 detailed types of unemployment-related benefits. Within the EU-27 (excluding Bulgaria and Croatia), there was a considerable increase in the level of expenditure for other benefits in kind (an increase of 281.1 % in current price terms), redundancy compensation (up 173.2 %) [4], other lump sum benefits (up 143.0 %), placement services and job search assistance (up 89.4 %), mobility and resettlement (up 75.5 %) and full unemployment benefits (up 53.4 %).

Table 1: Expenditure on unemployment-related benefits by type, EU, 2000 and 2017
Source: Eurostat (spr_exp_fun) and (spr_exp_sum)

In real terms, EU-27 (excluding Bulgaria and Croatia) expenditure on unemployment-related benefits was 5.4 % higher in 2017 than it had been in 2000. A more detailed analysis (see Table 1) among the 12 detailed types of unemployment-related benefits reveals that expenditure was lower (again in real terms) for seven of these benefits at the end of the period. The largest contractions in expenditure were recorded for periodic and lump sum vocational training allowances (down 62.9 % and 66.3 % respectively) and for early retirement benefits for labour market reasons (down 57.6 %). It is not surprising to observe a decline in the level of expenditure for early retirement benefits as EU employment policy has focused on extending working lives and encouraging older workers to remain active in the labour market rather than facilitating their premature withdrawal. Early-retirement benefits are therefore out of line with policy objectives and are generally being used less. Indeed, expenditure on such early-retirement benefits fell in the vast majority of Member States where such benefits exist. Comparing 2017 with 2000, it was relatively common to find that periodic cash payments for vocational training allowances had stopped altogether in some Member States, while there was a large decrease in such payments in Germany (85.9 % lower in 2017 than in 2000) and Denmark (64.6 % lower).

Figure 11 provides information on the development (in constant prices terms) for several detailed benefit types and for the total number of unemployed persons. In the EU-27 (excluding Bulgaria and Croatia), the number of unemployed persons fell to a low in 2008, increased at a rapid pace in 2009 and continued to rise (albeit at a slower pace) through to 2013, after which there was a reduction in the level of unemployment for four consecutive years. Between 2016 and 2017 the total number of unemployed persons fell below its level from 2000 (for the first time since 2008). The development of unemployment-related benefits during the period 2000 to 2017 should be considered in light of the overall changes to EU labour markets and especially those concerning the level of unemployment, with benefit payments often closely linked to the developments in the number of unemployed persons. That said, while the total number of unemployed persons in the EU-27 (excluding Bulgaria and Croatia) did not peak until 2013, expenditure levels for some unemployment-related benefits peaked far earlier, for example, in 2009 for partial unemployment benefits and for redundancy compensation.

Figure 11: Expenditure on unemployment-related benefits by detailed benefit type and number of unemployed persons, EU, 2000-2017
(index, 2000 = 100)
Source: Eurostat (spr_exp_fun), (spr_exp_sum) and (une_rt_a)

Partial unemployment benefits and redundancy compensation also showed the highest degrees of fluctuation in expenditure levels for unemployment-related benefits in the EU. The level of expenditure for both of these benefits peaked in 2009, although it then declined quite dramatically for partial unemployment benefits, while remaining relatively high for redundancy compensation. Their high degree of variation in expenditure may reflect, at least to some degree, the relatively short-term nature of both types of benefit, with expenditure seldom persisting for long periods after an initial shock (such as the global financial and economic crisis).

Data sources

Social protection related data presented in this article are from the European system of integrated social protection statistics (ESSPROS), specifically the core system. These data are collected from national statistical offices and/or ministries of social affairs in each country and are generally compiled from administrative sources.

Regulation (EC) No 0458/2007 of the European Parliament and of the Council provides the legal basis for the collection of this data and a series of Commission Regulations provide further specifications for the implementation of this Regulation.

EU-27 aggregate is calculated excluding Bulgaria and Croatia to ensure data comparability for all the period considered (2000-2017), taking into account that Bulgaria joined the European Union in 2007, Croatia in 2013, and the respective data are available starting for reference year 2005 (for Bulgaria) and 2008 (for Croatia). These two Member States contributed in 2017 for less than 0.3 % to the EU-27's total expenditure on unemployment related benefits.

Context

The organisation and financing of social protection systems is the responsibility of each of the EU Member States. Nevertheless, the European Commission provides support to help reach these targets through flagship initiatives such as the European pillar of social rights and the Europe 2020 strategy.

The European pillar of social rights is built upon 20 principles, including:

  • Principle 4: that seeks to ensure that long-term unemployed persons have the right to an in-depth assessment at the latest after 18 months of unemployment; and
  • Principle 13: that seeks to ensure that the unemployed have the right to adequate activation support from public employment services to (re)integrate into the labour market and adequate unemployment benefits of reasonable duration.

On 8 November 2019, the Council adopted the Recommendation on Access to social protection for workers and the self-employed, a key initiative part of the roll-out of the European Pillar of Social Rights.

The Europe 2020 strategy for smart, sustainable and inclusive growth set a target to lift at least 20 million people out of the risk of poverty and social exclusion and to increase the employment rate to 75 % among the population aged 20-64 years.


Furthermore, the European Commission provides guidance to EU Member States to modernise their welfare systems through the social investment package.

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Social protection expenditure (spr_expend)
Social protection receipts (spr_receipts)
Pensions beneficiaries (spr_pension)
Net social protection benefits (spr_net_ben)

Notes

  1. People who are without work, currently available for work and seeking work; see Unemployment.
  2. See http://ec.europa.eu/eurostat/web/lfs/overview.
  3. Minimum income allowance is reported in the expenditure on social exclusion in ESSPROS rather than as expenditure on unemployment-related benefits unless specific provisions are made for the unemployed.
  4. The increase in expenditure for redundancy compensation is likely to be overstated due to the above-mentioned break in the series for severance pay in Italy.