World Ranking in Unemployment Benefit Replacement Rates

by Tim Viandras, a PhD student at the London School of Economics, researching the political economy of welfare states and labour market policies in the European Union, 11 April 2012

In times of crisis, workers who lose their jobs need to retain their purchasing power. A high replacement rate (ratio of unemployment benefits received relative to the last gross wage) mitigates the negative effects of rising unemployment on aggregate demand. It also prevents workers from falling into poverty when they lose their jobs.

This table shows the gross replacement rate in the first year of unemployment for all countries for which data are available. The data are taken from a recent IMF working paper. Countries are ranked from highest to lowest for countries in which replacement rate is > 0).

European countries did not have all the highest replacement rates in 2000, challenging the idea that only the best developed countries have the best protection for workers. Workers who have unemployment insurance in some non-EU countries score higher. In the top 10 are Ukraine, Algeria, and Taiwan, while Russia, Tunisia, Romania and Hong Kong make it into the top 20.

The Anglo Saxon countries rank poorly: UK (46th), Australia (43rd), Ireland (39th) and the US (31st) coming after Venezuela, Azerbaijan, Egypt, Belarus. The picture for Eastern European countries is more mixed with Bulgaria (16th), Romania (18th), Ukraine (9th) doing ok, whereas Estonia (48th), Poland (41st), Czech Republic (42nd) do not do so well.

	Country	Gross Replacement Rate, year 1
1	Netherlands	0.7
2	Switzerland	0.687
3	Sweden	0.685
4	Portugal	0.65
5	Spain	0.635
6	Norway	0.624
7	Algeria	0.612
8	Taiwan	0.6
9	Ukraine	0.56
10	Italy	0.527
11	Denmark	0.521
12	Russia	0.505
13	Tunisia	0.5
14	Finland	0.494
15	France	0.479
16	Bulgaria	0.473
17	Canada	0.459
18	Romania	0.45
19	Hong Kong	0.41
20	Austria	0.398
21	Belgium	0.373
22	Argentina	0.354
23	Germany	0.353
24	Greece	0.346
25	Azerbaijan	0.338
26	Egypt	0.329
27	Venezuela	0.325
28	Belarus	0.313
29	Israel	0.307
30	Japan	0.289
31	United States	0.275
32	Kyrgyzstan	0.255
33	New Zealand	0.254
34	Latvia	0.253
35	Uzbekistan	0.25
36	Uruguay	0.25
37	Korea, South	0.25
38	India	0.25
39	Ireland	0.238
40	Hungary	0.235
41	Poland	0.226
42	Czech Republic	0.225
43	Australia	0.21
44	Turkey	0.206
45	Albania	0.202
46	United Kingdom	0.189
47	Brazil	0.152
48	Estonia	0.132
49	Lithuania	0.117
50	Chile	0.115
51	Georgia	0.09

Data taken from: Mariya Aleksynska and Martin Schindler (2011) Labor Market Regulations in Low-, Middle- and High-Income Countries: A New Panel Database. IMF Working Paper.