EEO Review : adapting unemployment benefit systems to the economic cycle - Malta

Abstract

It is commonly perceived that over the past decades, Malta has created a generous welfare state, including among others, free education and healthcare, adequate pensions and safety nets that result in relatively low poverty levels. Indeed, the Eurostat Household Budgetary Survey revealed that in 2008, 14 % of the Maltese population was at risk of poverty, in comparison to the higher EU-27 average of 17 % (Times of Malta, 2010). Despite this, in 2009, expenditure on social protection benefits amounted to ‘only’ about a fifth of Malta’s Gross Domestic Product, a figure considerably lower than that of the EU average of about a quarter of the GDP in 2008 (National Statistics Office, 2011). However, whereas between 2005 and 2008, social protection benefits in the EU-27 grew by 9.5 %, Malta registered an increase of 22.3 %. In line with the fact that Malta has a relatively low unemployment rate, in 2008, unemployment benefits only amounted to 2.7 % of the total expenditure on social protection, when compared to the 5.2 % of the EU-27. Out of the various types of social benefits, in 2009, unemployment benefits registered the highest increase (of EUR 5.1 million) when compared to 2008, mainly due to the increase in unemployment in 2009. The unemployment benefit system in Malta is regulated by the Social Security Act (Government of Malta, 2011b). The Act provides for two main schemes, the contributory and the non contributory schemes. The contributory scheme is universal, covering all strata of society. All workers pay weekly contributions to their national insurance in order to be entitled to unemployment, sickness and retirement benefits. On the other hand, the non contributory scheme, originally meant to cater for persons living below the poverty line, is based on a financial means test. Unemployment benefits provided under the Social Security Act are partly funded by social security contributions levied upon employed persons and employers, and partly funded by the Government through tax revenues. The rates paid by employees and employers vary according to their level of income. Unemployment benefits are awarded by the Social Security Department (SSD). However, in order to claim such benefits, a person must be registered as available for, capable of and be seeking full time employment, in the Employment Register kept by the Employment and Training Corporation (ETC). In its role as Malta’s public employment service organisation, the ETC is in charge of helping those seeking employment through job-matching processes and the provision of training and work experience programmes. Unemployment benefits are payable for a maximum period of 156 days, and must not exceed the number of contributions paid. To re-qualify for such benefits, a person must be in insurable employment for 13 weeks from the last day of his/her entitlement for such benefits (Zerafa, 2007). When the 156 days run out, unemployed persons can apply for the long-term benefits known as ‘unemployment assistance’, which they continue receiving throughout the whole unemployment period. Besides, unemployed persons may be entitled to an increase in unemployment assistance under special circumstances. Apart from a few exceptions, all unemployment assistance is stopped when employment, even if on a part-time basis, is found. All those in receipt of unemployment assistance are also eligible for free medicines, full children’s allowance, and energy benefit.