Uneducated young people will be the most affected by the government’s reform of the least generous unemployment benefit, kontanthjælp.
The government hopes to find savings in the kontanthjælp system that can be passed along to fund a reduced corporate tax rate that is expected to be included in its growth and jobs bill later this week.
The employment minister, Mette Frederiksen (Socialdemokraterne), said at a press conference today that the government tried to strike a balance between those who didn’t think there was need for reform, and those who think the best way to get people into to work was to reduce the generosity of benefits.
Instead, Frederiksen’s reform focused on strengthening initiatives that will ensure people are better equipped to find work.
“Those that can, must [work] and those that can’t, need to receive better help than they do today,” Frederiksen said. “The reform will mean that more people end up taking education and that more people end up in work instead of being on kontanthjælp. The reduced expense for kontanthjælp and increased tax revenue from people who end up in work will ensure the reform results in a profit.”
Frederiksen announced already in January that she preferred increasing the educational level of young people rather than simply cutting the generosity of kontanthjælp.
Her position is supported by the low educational level of young people who receive kontanthjælp. Some 50,000 of the 135,000 people currently receiving kontanthjælp are under the age of 30 and 90 percent of them do not have any post-secondary education. Three-quarters of them only completed public school.
Under the current system, uneducated under-25s who are able to work can be forced to take an education in exchange for accepting kontanthjælp. This will now be extended to under-30s but instead of kontanthjælp they will be given an education benefit equivalent to the student grant SU, which is about half the rate of kontanthjælp.
However those who are not considered ready to take an education will continue to receive kontanthjælp at the current rate as long as they take steps to prepare for an education.
Educated under-30s who are able to work will also continue to receive kontanthjælp while they look for work, but at a lower rate also equivalent to SU.
The government’s reform is also bad news for unmarried couples who live together, as they will now be treated like married couples. If one earns over a certain income threshold, their unemployed partner loses the right to receive kontanthjælp.
While the reform tightens the requirements for kontanthjælp and reduces the rate for most under-30s, it also places a greater emphasis on getting the unemployed to take on community service work six months after becoming unemployed. The government hopes that by giving some structure to the lives of the long-term unemployed, it will reduce the number of children who are brought up by families in which neither parent works.
Single parents are also a vulnerable group that risk remaining unemployed for long periods while they bring up their child. The government has promised extra resources to get single parents into education and work.
All kontanthjælp recipients will be made to work harder for their benefits. The old model whereby kontanthjælp recipients were divided into three groups depending on how prepared they are to enter the labour market will be scrapped.
The weakest group was essentially considered to be too far from the labour market to be saved and so were left to their own devices. Now, however, they will increasingly be given commitments to live up to in order to accept their benefit.
The vast majority of kontanthjælp recipients are vulnerable individuals who would benefit little from having their unemployment benefit slashed. Some 106,000 kontanthjælp recipients are currently considered unprepared for the labour market and 37 percent of those are aged under 30.
Despite increased expenses for education and targeted initiatives by job centres and councils to get the unemployed into work, the reduced amount of kontanthjælp paid out particularly to those under 30 is hoped to net 368 million kroner in 2014.
The government hopes that 2,500 people will enter the labour market and 1,000 more will pursue an education as a result of the reform in 2014. By 2017, the government hopes to save over a billion kroner from the reform.
