Stress Testing Unemployment Insurance and Labor Market Programs

Overview & Synopsis

Countries in Europe and Central Asia (ECA) are facing a variety of climate-related events that pose risks to their socio-economic stability, prompting a reevaluation of unemployment insurance systems. This report explores how climate change and the green transition affect the design and operation of unemployment insurance, recommending reforms and complementary programs to enhance resilience. It includes a database detailing unemployment insurance characteristics across the ECA region and emphasizes expanding traditional measures - such as unemployment benefits, employment services, and training to incorporate targeted actions like partial benefits, tailored services, and support for displaced workers. Job preservation tools, including short-time work, furlough programs, wage insurance, and into-work subsidies, are highlighted as essential for maintaining employment and income levels during climate disruptions. Additionally, the report introduces a new stress test to evaluate how well unemployment insurance systems can respond to climate-related shocks and broader structural changes, such as economic crises, pandemics, trade shifts, or technological advancements.