The significant intervention in the way social benefits, including unemployment benefits, are provided will be a key focus of Kyriakos Mitsotakis‘ address at the Thessaloniki International Fair (TIF) the weekend after next. The first meetings at the Maximos Mansion with the economic team have already begun, with government officials being cautious about the extent of the benefits. On the other hand, Mr. Mitsotakis is expected to focus on reforms with a tangible social impact.
To this end, several meetings will be held this week at the Maximos Mansion to finalize the TIF plan.
At the same time, Mr. Mitsotakis will be in Thessaloniki on Tuesday, where, along with Akis Skertsos, he will present the National Strategy for Regional Development at the Music Hall, as well as the digital platform for regional development plans. He will then meet with the productive sectors of Northern Greece, while earlier, he will meet with the “blue” MPs of the two regions of Thessaloniki.
As part of this plan for reforms with a tangible social impact, the unemployment benefit will undergo a complete redesign, as exclusively reported by Proto Thema. The core of the government’s thinking is that the benefit should not act as a disincentive to work, especially at a time when unemployment is visibly decreasing and, for the first time in years, dropped to single digits during the summer months. According to the latest data from the Statistical Authority, unemployment in June decreased to 9.6% from 17.5% in the same month in 2019. The number of employed people during the same period increased by 405,000, reaching 4,293,000 from 3,898,000 in 2019. For the government, this development is the result of the economic policy being implemented, which includes tax cuts and attracting investments, leading to the creation of over 400,000 jobs since 2019. While the labor market numbers are beginning to return to pre-crisis levels, with the focus shifting from finding jobs to finding workers for businesses, state spending on benefits is increasing. In other words, the number of unemployed is decreasing, but the amount spent on benefits has multiplied.
The data from the Public Employment Service (DYPA) available to Proto Thema is revealing. Although the unemployment rate is decreasing and is estimated to reach 10.6% in 2024, the budget expenditure, given the increase in the minimum wage (to which the unemployment benefit is organically linked), amounts to €1.76 billion. This amount is significantly higher than the €1.59 billion spent in 2023 when the final unemployment rate was 11.6%.
“The conditions in the labor market have changed, and the benefit must function as a mechanism for quickly reintegrating the unemployed into productive activity to meet the real needs of all sectors for workers,” a relevant government source said, explaining the philosophy behind the intervention that Mr. Mitsotakis will announce. Essentially, what the government is planning is to tighten the criteria for workers to qualify for the “protection umbrella,” making the benefit fair and proportional based on the worker’s employment history while also serving as an incentive for a rapid return to the labor market.
According to the government plan that the Prime Minister will present in more detail, the benefit will have a fixed component, a variable component based on each beneficiary’s years of employment and earnings, and additional amounts (e.g., bonuses for Easter, Christmas, children, single-parent families, etc.). In practice, this means that the benefit will not be uniform and flat—different amounts will be received by a young worker compared to someone with 20 years of work experience and contributions.
Regarding the new structure of the benefit, the fixed portion of the unemployment benefit will be front-loaded, starting high to address the shock of transitioning into unemployment and then decreasing quarterly to serve as an incentive to find a job. The variable portion will be proportional, meaning that the more a worker has contributed to the system, the higher the amount they will be entitled to. Of course, many details remain to be finalized, such as the total and maximum amount, who will receive it for 12 months or less based on specific criteria, the required employment period for eligibility, and the ratio of work time to each month of benefit.
Additionally, the government will “correct” the conditions for eligibility for unemployment benefits that were modified during the COVID-19 period in 2020. The minimum employment period will return to the previous requirement of 10-12 months, instead of the 5 months currently required. This intervention is expected to close several “loopholes,” where workers work for a few months and then transition to unemployment benefits while taking on occasional jobs, often with “black” payments. A typical example is the tourism industry, where there are special provisions for the seasonal unemployment benefit. It is considered crucial that the entire philosophy of the benefit be rationalized, so the tourism sector can acquire more long-term characteristics, and the season can be genuinely extended, instead of the official end of the season equating to the transfer of workers to the unemployment benefit pool.
Currently, under labor law, a worker employed for two consecutive seasons in seasonal businesses gains access to the seasonal benefit after completing 100 days of work in the last 12 months—meaning 4 months of work are sufficient to receive the benefit. On the other hand, a regular unemployed person must have completed at least 125 days of work in the last 14 months to receive the benefit, excluding wages from the last two months.
