The Government of Georgia is considering introduction of a mandatory unemployment insurance mechanism in the country. The introduction of a new component is planned under the new Social Code, which has been officially announced two days ago.
According to the presentation, new Social Code includes mandatory medical insurance, social, unemployment, as well as accident and temporary disability benefits.
Deputy Minister of Health Tamar Barkalaia notes that the main goal of the Code is to provide adequate protection to the citizens, which includes social payments, health care needs, labor market policy, as well as unemployment insurance and reinsurance.
The Ministry does not talk about additional details, therefore it is unknown what model of mandatory unemployment insurance will be selected by the government.
Various methods of financing unemployment insurance are used in different countries. Including, insurance is financed from the state budget, as well as from the contributions of employers and employees. Often funding is provided by all three parties, as is the case with pension contributions.
Due to the fact that both the employer and the employee have to make a 2% contribution within the framework of the pension reform, the Georgian Trade Union does not support the model of mandatory unemployment insurance. Their position is that at this stage the state itself should undertake responsibility of mandatory unemployment insurance and pay benefits to those who lose their jobs.
"Unemployment benefit means providing assistance to the unemployed citizens from the state budget for 6 months. This is different from the approach that has been proposed and it is not unemployment insurance which involves the payment of contributions by employees and employers, because at present we believe that employees cannot make additional contributions to the new fund, Because they already have to make a contribution to the pension fund.
We believe that the state and the budget should take over the payment of unemployment benefits, although this will not be a big pressure since the benefit period will be limited to 6 months and this will apply only to those who worked and remained unemployed and not to those, who have never worked in general.
In a non-crisis period, about 40,000 citizens lose their jobs every year and then find them. Accordingly, about 40 million GEL will be needed from the budget. Of course, this number will be higher during the crisis period,” said Giorgi Chanturidze, an economic analyst at the Trade Union.
The private sector does not support introduction of a mandatory unemployment insurance. The position of the Employers' Association is that the risk of remaining unemployed should be reimbursed by the employees themselves in the form of salary insurance.
"Amid the pandemic, we saw very well how many people needed it when they lost their jobs and the resources that should have come from insurance companies. We would not get this social background if their salary had been insured.
Our position is that unemployment insurance should be voluntary and employees must have free choice to insure themselves against the risks that could potentially arise, "- said Lasha Labadze, CEO of the Employers' Association.
Healthcare Expert Zurab Chiaberashvili says the initiative of unemployment insurance will be counterproductive for the country.
"Targeted social assistance program is operating in Georgia since 2006. According to the several types of research made by the World Bank in 2010, the introduction of social assistance program led to reduction of poverty in Georgia from 2000 to present”, Zura Chiaberashvili notes.
According to the Healthcare Expert, the introduction of mandatory unemployment insurance now will be completely unjustified and counterproductive. This will not contribute to high economic growth or job creation, on the contrary, economic growth will be hampered and as a result more people will become dependent on the social benefits.
As of Q1 2021, 129 thousand citizens are employed in the country, and 317 thousand 500 people are unemployed. The unemployment rate hit a record 21.9% during this period.
