SAFETY CUSHION

Azerbaijan has secured stable economic and social development even amid the economic crisis experienced by the world. This makes it possible to continue to implement economic reforms, create new jobs and improve employment. But at the same time, President Ilham Aliyev noted, about 30,000 jobs were closed in the nine months of 2015 despite the creation of 67,000 new ones. Of course, after some time, those who lost their jobs will find other jobs as the positive balance in this process persists. But it is at this moment that the presence of a "safety cushion" for jobseekers becomes important.

For the first time in Azerbaijan

And the initiative to create such a "cushion" was put forward by Minister of Labour and Social Se-curity Salim Muslimov, who voiced the need to create a separate system of insurance for unemployment. At a meeting of the Cabinet of Ministers in the first half of 2015, he presented the general idea and concept to President Ilham Aliyev. And now, after only 3-4 months, a new bill regulating all legal aspects of the issue has been prepared.

This is a fundamentally new concept that will be introduced in the socioeconomic life of Azerbaijan. According to the Public Relations Department of the Ministry of Labour and Social Security, the bill "On compulsory insurance against unemployment" defines the legal, economic and organizational basis for relations in the sphere of applying compulsory insurance against unemployment in the country. This type of insurance, as an element of social protection, is different from the concept of the "unemployment allowance", in particular, by the fact that in the event of job loss, people will be paid insurance from payments made during the period of employment.

What is the main problem for an employee who has lost his regular income? Of course, first of all, it is to find a job as soon as possible, preferably a well-paid job that matches his knowledge and skills. But in fact, the search may drag on, especially if there are many such workers on the labour market. This is what frightens people most of all, as they urgently need to cover their current expenses. Moreover, consumer loans are very popular in our time, and banks are unlikely to accept the situation and revise the order of payments in the event of job loss. If you are insolvent, the "punitive" mechanism of fines is enforced.

As a result, people have to settle for lower-paid and less skilled jobs, and the reason is that the process of changing jobs is burdened with a lack of funds and a lack of sufficient time for search. However, if there is a certain "safety cushion" in the form of a guaranteed sum that is sufficient to provide for yourself and your family, a sum received for a certain period, the probability of finding a more acceptable position increases. There are many instances where sometimes an experienced engineer has to "retrain" to be a taxi driver, teacher or babysitter.

The system of comprehensive measures, which includes unemployment benefits, compensation from the employer to dismissed workers, the search for jobs at employment centres, labour fairs, training courses, etc., is meant for such cases. It should be noted that in January-September this year alone, the State Employment Service at the Ministry of Labour and Social Security provided jobs for 22,400 people, while 2,776 citizens were involved in professional training courses and 3,089 were provided with temporary jobs. Since the beginning of the year, different regions of the country have held 54 job fairs, which resulted in 4,119 people getting vacant jobs. Of these, 3,641 were provided with suitable jobs, 440 people were involved in professional training courses and 229 people in paid public work. The size of the unemployment benefit as of 1 October this year amounted to 255 manats and was received by about 2,000 people from the almost 30,000 officially registered as unemployed.

Of course, those payments cannot be called significant, and it is unlikely that they will be able to fully provide the same "safety cushion" that will make it possible to find a decent source of income. At present, it is unclear whether the compulsory unemployment insurance fees will substitute unemployment benefits or they will exist complementing each other. However, it is clear that the effectiveness of the proposal by the Ministry of Labour and Social Security depends on the extent to which the unemployment insurance will be the key for a fruitful search for a new job.

Experience

What is the unemployment insurance in practice? This is the payment of a certain amount (a fixed amount or a percentage of the monthly salary in relation to insurance contributions) for a pre-specified period.

In many countries, this type of insurance is a commercial product offered by insurance companies, which, together with the whole range of financial and other support for laid-off staff, allows the latter not to worry about their daily bread for a certain time and devote themselves to finding new jobs. Typically, data on the employment contract, the period of the operation of the employer on the market, the age of the client, etc. are important for insurers. Payments to persons who have lost their jobs begin after they are given compensation by their former employer. To claim their insurance, dismissed workers should have their unemployed status confirmed by the employment service.

Most often, insurance against the loss of income is offered to borrowers as an additional risk in complex credit insurance or as a separate product, and is even a necessary condition for a loan. However, what is insured in these cases is not the client's income, but only payments for the loan for a certain period, and the beneficiary is usually the bank.

In order to apply the system of compulsory unemployment insurance, a special fund is usually created. A typical example of this can Turkey, where workers, employers and the government should pay mandatory fees to the unemployment insurance fund at a rate of 1, 2 and 1 per cent, respectively, from the size of the salary before tax. Payments to the unemployment insurance fund are made monthly. Employers can deduct these fees from their taxable income. On the other hand, workers' fees are deducted from their income tax base.

Risks and timeliness

With regard to the views of a number of local insurance companies about the possibility of a new type of insurance appearing on the market, they told R+ that as a commercial product it is quite a risky venture, since it opens up a wide field of activity for various types of fraudsters seeking to cheat insurance companies. In this regard, very few companies offer this kind of insurance. As a rule, to protect yourself from fraud, you need to put forward tough conditions for obtaining a policy.

With regard to the intentions of the Ministry of Labour and Social Security to develop a system of compulsory insurance against unemployment, domestic insurers are not talking yet about how the system should work, given that the relevant bill is being prepared. It is possible that a separate fund be created, which will be engaged in insurance payments, as well as direct the funds collected towards improving the system of protection for vulnerable groups and creating new jobs.

But with all this, the formation of a system of compulsory unemployment insurance is important. At the moment, such initiatives are being discussed in many countries, including in the former Soviet Union, but the consequences of the global economic crisis, lack of macroeconomic stability and lack of strong demand for labour does not allow it to be implemented fully. And in Azerbai-jan, according to experts, the stable economic situation makes it possible to introduce this system as soon as possible.