Who is not a member of an unemployment fund?

Abstract

In Finland, eligibility for earnings-related unemployment benefits requires not only meeting the employment condition but also having voluntary unemployment insurance, i.e., membership in an unemployment fund. This study examines employees who are not members of an unemployment fund. It also analyses workers’ mobility into and out of unemployment fund membership and the factors associated with such transitions. In addition, the study investigates the role of different subgroups of non-members in explaining the observed change in fund membership between the beginning and end of the observation period. The data consist of extensive individual-level register data from Statistics Finland covering the years 2004–2017.

A central question regarding unemployment fund membership concerns the role of unemployment risk in selection into membership. Based on positive correlation tests, additionally insured employees have a higher risk of unemployment compared to those without supplementary insurance. However, behavioural incentives may also influence perceived risk, though these are not examined in the study.

In statistical models explaining non-membership, a higher individual unemployment risk is also associated with a lower probability of being outside an unemployment fund. The results indicate that men, younger individuals, those with lower education, persons of foreign background, and urban residents are more likely to be non-members compared to women, older individuals, more highly educated persons, those of Finnish background, and rural residents. Regarding employment characteristics, lower wage levels, part-time and fixed-term contracts, smaller workplaces, employment in the private sector, and work in private service industries such as accommodation and catering are also associated with a higher likelihood of not belonging to an unemployment fund relative to the reference groups.

The mobility results show that transitions into unemployment fund membership over a two-year period are, on average, clearly more common than exits from membership. There are also systematic differences in mobility patterns by age group and education level.

Overall, unemployment fund membership has slightly declined between the early and later years of the data. Decomposition analysis suggests that most of the observed change is explained by an increasing share of individuals who have never belonged to an unemployment fund. (AI translation)

• ISSN: 2242-6914 (Online)
• ISBN: 978-952-209-192-5 (Online)
• Publication in PDF-format