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

Open Access

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 ...