LO and 3F struggles to improve the unemployment benefits
Unemployment funds (A-Kassen) are run by unions, but the unemployment benefits are paid by the state, and it is the state that sets the rules and tariffs. LO and 3F work hard to maintain and improve the unemployment benefit system, and here is LO's bid on what problems there are with the current system today and how the government can solve these problems.
What is the problem with the unemployment system?
In Denmark, we should feel safe. There should be a great safety net, to grab you if you fall. For example, there should be a great unemployment benefit if you become unemployed.
That's how you get a great work life: You feel safer, dare to take more chances, and move between jobs when you want. At the same time the employers do not have to give their workers long notice before firing, because the workers do not fear being fired. That is how it has been in Denmark so far and we call this model: Flexicurity.
Unfortunately, the confidence in our flexicurity model is falling. Since the mid 90's, the value of unemployment benefits has fallen from 63 per cent of the average salary to 54 per cent. in 2018. This corresponds to a decrease in unemployment benefits of 2,500 DKK per month or 30,000 DKK per year. And this fall will continue until 2025. At that time, the value of the unemployment benefits will be reduced to 50 per cent of the average salary.
In other words, it will be harder to manage financially if you lose your job, and that means:
- Insecurity for all workers in the labor market - employed as unemployed.
- LO unions will demand, that employers give longer notices before workers are fired, which is bad for the companies and the economy.
- Fewer will dare to change jobs - witch is bad for the the companies and the economy.
- Fewer will join the unemployment fund (A-Kasse), which will increase the cost of unemployment for the state.
What is the solution?
We need to strengthen unemployment benefit so that workers can be safe in their working lives. Therefore, LO proposes:
•To stop the fall in the value of the unemployment benefit by raising the maximum annual unemployment benefit rate by a total of 13,400 DKR by 2025.
•The price of membership must be maintained at the level they are on today. The price must not rise with the value of the unemployment benefit.
•That the membership contribution is halved for employed young people under 25 years who are not covered by the existing exemptions. In practice, this means that the price will fall by just over DKK 2,000 a year.
What is the effect of LO's proposals?
The proposals will provide a more attractive unemployment benefit system, which will ensure support for the unemployment benefit system, the Danish model and the flexicurity model.
More specifically, LO's proposals will mean:
- More safe employees. With more peace of mind, more jobs change. It provides mobility and ensure a good match between job and employee, thus increasing business productivity.
- Lower costs for businesses when they fire and hire people and increased productivity.
- Lower unemployment costs, as the proposals ensure flexicurity, which reduces both overall unemployment and long-term unemployment.
- Lower costs for the unemployed, because more joins unemployment fund (A-Kasse).