Romania To Set Unemployment Aid At 75%- 90% Of Reference Social Indicator Of RON500

Unemployment aid in Romania could be set at 75% to 90% of the country’s reference social indicator, which is currently at 500 lei (EUR1=RON4.2972), people close to the matter said Monday, adding the measure is to be discussed by the Government.

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Romania's Government has committed to the IMF to no longer tie unemployment aid to the minimum wage to avoid having to raise it along with the wage hike planned for 2011, according to the Government's letter of intent, obtained by MEDIAFAX.

Unemployment aid is currently at 75% of the minimum wage, plus 3% to 10% of the average gross wage for the past 12 months, depending on the jobless person's social security contributions.

"Current talks are to replace the minimum wage with the reference social indicator and set unemployment aid at 75% of this indicator, or maybe even at 80-90%," the sources said.

They added the Labor Ministry wants to encourage jobless people to seek employment and the current system fails to encourage that.

"If we keep unemployment aid tied to the minimum wage, the average unemployment aid will nearly equal net income and people will not be encouraged to seek employment for an extra RON10. The Government wants to widen the gap between net income and unemployment aid," the sources said.

For 2011, the Government agreed with the IMF to raise the minimum wage to 670 lei (EUR1=RON4.2972) from the current RON600. The additional letter of intent agreed with the Fund after its review mission late October, obtained by MEDIAFAX, states the Government has committed to no longer tie unemployment aid to the minimum wage.

"After freezing the minimum wage in 2008, we shall increase it, generally to compensate for inflation, but will disconnect it from the unemployment aid," the Government said in the letter.

People close to the matter told MEDIAFAX the Government is no longer tying unemployment aid to the minimum wage to limit expenses from the unemployment budget, considering a new wave of public sector layoffs is planned for next year.

Contacted by MEDIAFAX, Labor Ministry state secretary Valentin Mocanu only said the Government is currently working to set different criteria to calculate unemployment aid.

Romania's National Prognosis Commission sees the jobless rate at 8% by the end of the year and expects the rate to drop slightly to 7.8% in 2011.

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