Unemployment Compensation throughout the World: A Comparative Analysis

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Unemployment compensation throughout the world: A comparative analysis. By Wayne VROMAN and Vera BRUSENTSEV. Kalamazoo, MI, W.E. Upjohn Institute for Employment Research, 2005. ix + 273 pp. Tables, figures, appendices, bibliography, index. ISBN 0-88099-322-7.

This book provides an overview of unemployment compensation around the world. Based upon a well-documented comparative analysis, it examines both country situations in several regions of the world and some of the major issues that unemployment benefit schemes are confronting today.

The first two chapters of the book are concerned with the general background to unemployment compensation. The first chapter provides an introduction to background employment data based on a presentation of the main macroeconomic and employment indicators for 150 countries, aggregated into eight regions, followed by a discussion of surveys and methodological problems in the production of those data. In the course of this overview, the authors revisit a number of concepts, such as underemployment, unemployment and full employment. Without understating the difficulty of defining them, the discussion here is of such clarity as to enable even the non-expert reader to grasp them with accuracy.

This concern for clarity pervades the entire book, including the following chapter which defines the various forms of unemployment protection: insurance, assistance and mixed schemes; temporary employment programmes; or contributions to individual savings accounts designed to help their holders cope with the vicissitudes of their working lives. This chapter also shows unemployment compensation to be strongly correlated to each country's level of development: the amount of compensation is a function of three factors, namely, the rate of unemployment, the ratio of compensation recipients to the total number of unemployed workers, and the wage replacement rate (i.e. the ratio of unemployment compensation to previous earnings). On these issues, the authors provide a wealth of enlightening information and comparisons. For example, outside of the OECD countries and the former communist countries, the proportion of unemployed workers receiving compensation is relatively low. Of all the Latin American and Asian countries examined here, only Brazil and Japan have a ratio above 25 per cent.

The authors go on to show that the cost of unemployment compensation is higher in those countries that have a mixed insurance/assistance scheme than in those which have a scheme based on only one of the two options. Moreover, in countries that operate a mixed scheme the assistance component of expenditure is on an upward trend.

Each of the next four chapters is devoted to the employment situation and unemployment compensation in a specific region. In the 20 OECD countries they examine and compare in terms of employment performance, the authors show that political debate on active labour market programmes has failed to translate into adequate spending levels and that higher unemployment often leads to a relative reduction of such expenditure.

The transition countries experienced higher-than-expected unemployment and soaring compensation costs. Here, the authors discuss how compensation management may have contributed to exacerbating the situation, particularly in Bulgaria and Russia. …