Bern, Switzerland (GenevaLunch) - The upper house of Parliament this week has voted to back the government’s proposals to improve the financial health of the federal unemployment system. The national fund is currently  CHF5 billion in the hole and is likely to grow to a CHF6.3b deficit by 2010. If the lower house and a possible public referendum also back the measure, as they are expected to do, workers will see several changes, starting with higher deductions in 2011 and a longer paying-in period before they can claim full benefits.

The proposal as it stands today would increase workers’ payments from 2.0 percent of their salary to 2.2 percent. As a temporary measure to reduce the fund’s debt, this would be increased to 2.3 percent for several years and employees earning CHF126-315,000 would pay an additional 0.1 percent for some years as a “solidarity” measure.

Workers would need to have paid in to the system for 18 months instead of the current 12 in order to be eligible for 400 days of benefits.

The reform is needed to prop up the system financially, but even with the savings of nearly half a million francs a year that the proposal should provide, it will take 12-14 years to get the unemployment fund back in the black, says Finance Minister Doris Leuthard. The reason for the deficit is not the current economic downturn, according to TSR, but rather a mistake built into a 2003 reform that was based on unemployment figures which were too low.

The proposed reform could run into political problems, argues Le Temps’s Bernard Wuthrich in an editorial Wednesday 10 June, if some corrections are not made: the higher charges for workers will kick in just as cantons decide to raise their taxes to adjust budgets after a difficult 2009-2010 period. Groups such as the post office and CFF rail company that have agreed to hold off on rate increases during the economic crisis will begin to raise them at that point. The longer paying-in period could have a too-negative impact on young workers, Wuthrich notes, suggesting that the measure needs more work in the lower house before voters will approve it.

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