By Darshana Rajendran & Vishnu Prasad, IFMR Finance Foundation
Continuing our analysis of International Unemployment Support schemes, we now discuss designs in three South American countries: Argentina, Chile and Brazil.
Unemployment support in Argentina, Chile and Brazil can be divided into three types: severance payments, unemployment benefits and temporary public work programs.
1. Severance Payments
Severance payments are the compensation that an employer provides to an employee upon termination of employment. An unemployed person is not entitled to severance payments if she voluntarily leaves, retires or is laid off with “fair cause” (e.g. theft or repeated absence at work).
2. Unemployment Benefits
The table below lays out the design of unemployment insurance programs in Argentina, Chile and Brazil.
|Argentina||All private sector employees including temporary and casual workers, provided they have made at least six months’ contribution in the 3 years preceding lay-off||The program is financed by a 0.89% or 1.11% (depending on type of enterprise) premium on gross payroll, to be paid by the employer.||The benefit amount is calculated as half of the best salary of the beneficiary in the previous six months of work (within a maximum and minimum threshold of 250 pesos and 400 pesos respectively).||2-18 months|
|Brazil||Employees who have had a formal labour contract during the last six months or have been legally self-employed for at least 15 months||0.65 percent tax on revenues of private firms, 1 percent tax on revenues of public firms and a 1 percent of costs in non-profit firms.||Workers with a minimum of six and maximum of 11 months of prior employment earn three monthly payments; four monthly payments for 12-23 months of service; and five monthly payments for more than 24 months of service||3-5 months|
|Chile||All wage-earners in the labour force, aged between 18 and 65, who have a contract||The program is financed by two funds:- A Solidarity Fund (Government’s share from annual budget +employer pays 0.8% of each employee’s monthly wage)- Individual account (employer contributes 1.6% of employee’s monthly wage and the employee contributes 0.6% of her monthly wage)||The benefit amount is calculated as a percentage of the worker’s average payment in the last twelve months (benefits decrease by 5% of calculated average wage each month, ranging from 50% of average wage in the first month to 30% in the fifth month).||Max 5 months|
3. Temporary Public Work / Workfare/ Training programmes:
These forms of unemployment support are resorted to during times of crisis and are temporary in nature.
|Argentina||Plan Jefes de Hogar (PJH) guarantees 150 pesos in exchange for 4-6 hours of work per day in community projects. Any unemployed head of the family with children is eligible for participation.
Seguro de Capacitacion y Empleo (SCE) offers training and counseling services for low-skilled workers who receive a monthly benefit of 225 pesos up to two years. Alternatively, workers can choose to complete primary or secondary school.
|Chile||Most work programs are of temporary duration (3-6 months) and pay minimum wages to workers in exchange for public works. It is estimated that the work program of 1999 reduced the official unemployment rate by almost 1%.
Hiring subsidies were last used during the economic downturn following the East Asian crisis. Employers received a subsidy of 40% of minimum wage for hiring workers for a period of four months. In addition, employers received funds for employee training programs. The cost of this program was approximately US$ 60 million.
|Brazil||Brazil has workfare programs mainly concentrated in the Northeast for drought relief. In 1998-99 during the drought, R$ 1 billion was spent in drought related public works. The projects pay R$65 per month for a 27 hour work week. The federal government also pays 20 percent of this amount for non-wage costs (tools and material). The wage is roughly the same as the wage for casual labour in the Northeast. Plano Nacional de Qualificaçâo Profissional (PLANFOR) is another program that was started in1995, has a budget of R$ 500 million, and provides training for around 4 million people per year.|
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