The Labour Divide | Page 4

days to register all their unregistered and unreported workers – without
any penalty, retroactive or prospective (amnesty). Afterwards, labour
inspectors should embark on sampling raids. Employers caught
violating the labour laws should be heavily penalized. In severe cases,
closures should be enforced against the workplace.
All the unemployed must register with the Employment Bureau once a
month, whether they are receiving benefits, or not. Non-compliance
will automatically trigger the loss of the status of “unemployed”. If a
person did not register without good cause, he would have the right to
re-register, but his “unemployment tenure” will re-commence from
month 1 with the new registration.
I recommend instituting a households’ survey in addition to a claimant
count. Labour force surveys should be conducted at regular intervals –
regarding the structure of the workforce, its geographical distribution,
the pay structure, employment time probabilities.
The statistics Bureau should propose and the government should adopt
a Standard National Job Classification.
The Unemployment Benefits
Unemployment benefits – if excessive and wrongly applied – are self
-perpetuating because they provide a strong disincentive to work.
Unemployment benefits should be means tested. There is no reason to
pay unemployment benefits to the children of a multi-millionaire.
Unemployed with assets (especially liquid assets) should not receive
benefits, even if they are otherwise eligible. The benefits should scale
down in accordance with wealth and income.
Unemployment benefits should always be limited in time, should
decrease gradually and should be withheld from certain segments of the
population, such as school dropouts, those who never held a job, (in
some countries) women after childrearing.
Eligibility to unemployment benefits should be confined to those
released from work immediately prior to the receipt of the benefits,

who are available to work by registering in an employment bureau,
who are actively seeking employment and who pass a means test.
Benefits should be withheld from people who resigned voluntarily or
discharged due to misconduct or criminal behaviour. In the USA,
unemployment compensation is not available to farm workers,
domestic servants, the briefly employed, government workers and the
self- employed.
Unemployment benefits should not exceed short-term sickness benefits
(as is the case in Canada, Denmark and the Netherlands). Optimally,
they should be lower (as is the case in Greece, Germany and Hungary).
Alternatively, even if sickness benefits are earnings-related,
unemployment benefits can be flat (as is the case in Bulgaria and Italy).
In Australia and New Zealand, both sickness benefits and
unemployment benefits are means tested. It is recommended to reduce
the replacement rate of unemployment benefits to 40% of net average
monthly wages in the first 6 months of benefits and to 30% of net
average monthly wages thereafter in the next 6 months.

Unemployment benefits should be limited in time. In Bulgaria, they are
limited to 13 weeks, in Israel, Hungary, Italy and the Netherlands to 6
months and in France, Germany, Luxemburg and the United Kingdom
– 12 months. Only in Belgium are unemployment benefits not limited
in their duration. In most of these, countries, though, social welfare
payments replace unemployment benefits following the prescribed
period of time – but they are usually lower than the unemployment
benefits and serve as a disincentive to remain unemployed rather than
employed. It is recommended to limit the duration of unemployment
benefits to 12 months.
No health insurance should be paid for those unemployed for more than
6 months.
No unemployment benefits should be paid to a person who refuses
work offered to him or her on any grounds, except on medical grounds.
I recommend a few pilot projects with the aim of implementing them
nation-wide, should they prove successful:
A pilot project should be attempted to provide lump sum block grants
to municipalities and to allow them to determine eligibility, to run their
own employment- enhancement programs and to establish job training

and child care assistance. An assessment of the success or failure of this
approach in a limited number of municipalities can be done after one
year of operation.
The unemployed worker, who participates in the second pilot project,
should be provided with a choice. He could either receive a lump sum
or be eligible for a longer period of unemployment benefits.
Alternatively, he can be provided with a choice to either receive a
larger lump sum or to receive regular unemployment benefits. In other
words: he will be allowed to convert all or part of his unemployment
benefits to a lump sum. The lump sum should represent no more than 9
months of unemployment benefits reduced to their net present value
(NPV).

The third pilot project involves the formation of private unemployment
insurance plans to supplement or even replace the insurance
(compensation, benefits) offered by the Employment Fund. In many
countries, private unemployment insurance is lumped together with
disability and life insurance –