Cash transfers for working-age people provide a major income safety net in case of unemployment. In most countries, two layers of support can be distinguished: primary unemployment insurance benefits and secondary benefits (such as unemployment assistance or guaranteed minimum-income benefits) for those who are not or no longer entitled to insurance benefits. These guaranteed minimum-income benefits (GMI) provide financial support for low-income families to ensure an acceptable standard of living and play a crucial role as last-resort safety nets for long-term unemployed people.
In 2016, the shares of working-age individuals receiving out-of-work benefits were highest in France, Finland, Ireland and the United States, with rates above 10% ( 6.7). At the other end of the spectrum, in Chile, Israel, Japan, Korea and Turkey, less than 4% of the working-age population received at least one of these payments. These differences in the number of recipients reflect not only differences in employment rates, but also differences in benefit entitlement rules. In countries with the highest levels of receipt, entitlement to GMI benefits extends to low-income working families. In some countries (including France and Ireland), earnings from work can be combined with unemployment insurance payments under certain conditions.
On average, 5.8% of the working-age population received out-of-work benefits in the OECD in 2016. The rate was still above pre-crisis levels in many countries, especially those countries where unemployment remained elevated in 2016 (including Ireland, Lithuania and Spain) and in countries with a higher number of recipients of means-tested benefits (Finland, France, the Netherlands and the United States). In other countries (Czech Republic, Hungary, New Zealand and Slovak Republic), levels of benefit recipiency fell. This drop partly reflects a fall in benefit coverage among the unemployed as a result of either policy changes that have tightened eligibility conditions or changes in the composition of the unemployed that have led to fewer people meeting these conditions (OECD, 2018[1]).
In a large majority of OECD countries, the levels of primary unemployment insurance benefits are typically significantly higher than those of GMI benefits ( 6.8). On average across the OECD, 58% of net income in work is maintained in the initial phase of an unemployment spell for a single person without children with previous earnings at the average wage, but this falls to 31% once they become long-term unemployed.
GMI benefits are sometimes significantly lower than commonly used poverty thresholds ( 6.9). Indeed, in a few countries, a single person without children who has exhausted unemployment benefit entitlement receives no cash support at all: Turkey has no GMI benefit and in the United States support takes the form of “food stamps” from the Supplementary Nutrition Assistance Programme. For those living in rented accommodation, housing-related benefits like rent allowances can provide significant further income assistance, bringing overall incomes close to or somewhat above the poverty line (Denmark, Finland, Iceland, Ireland, Japan, the Netherlands and the United Kingdom). However, in all countries GMI benefits alone are insufficient to escape poverty. Family incomes in these cases depend strongly on the type of housing and family arrangements.
