The Stabilisation Properties of a European Unemployment Benefits Scheme. CEPS Commentary September 2016

This commentary looks at the (macro-economic) stabilisation properties of a potential European unemployment benefits scheme (EUBS). Any such scheme would of course involve many other aspects, both political and economic; for instance, it could be argued that an EUBS, especially one that pays benefits directly to individuals, would constitute a powerful illustration of the benefits of ‘Europe’. It might also be argued that the creation of an EUBS could foster the upward convergence of unemployment systems. But these issues are not considered here. Our concentration on the stabilisation aspect points to one direct implication: emphasis should be placed on the short-term unemployed. But the short-term unemployed make up ‘only’ about one-half of total unemployment at present. It is thus clear that the stabilisation aspect can cover only a part of the overall unemployment problem. Moreover, the share of the short-term unemployed varies greatly over time and across countries. This paper does not advocate the creation of an EUBS; it merely investigates the stabilisation properties of such a system, and as such constitutes a companion to “A European Unemployment Benefits Scheme: The rationale and the challenges ahead”,1 which makes ample reference to the vast academic literature on this issue