Once a symbol of the Luxembourgish welfare state, the scope of re-employment aid has been severely limited since the reform of April 2018. Stricter criteria have swept away accusations of abuse (which have never been quantified), all while leaving the unemployed aged between 40 and 45 and companies in need of a helping hand.
The re-employment aid, a legacy of the steel crisis, was born in 1979 in the wake of a flood of temporary measures aimed at cushioning the social disruption caused by the decline of the backbone of Luxembourg’s economy.
The goal was to guarantee to each unemployed person 90 percent of their previous salary, while they were looking for a new job. The Adem (at the time called "Employment Administration”, now known as the "Employment Development Agency") covers the difference between the salary paid by the new employer – at least the equivalent of the minimum wage — and said 90 percent threshold, up to a limit of 3.5 times the minimum wage, for up to four years. This was supposed to help the new employer gradually increase the wage back to the previous level. Re-employment assistance has allowed several generations of workers over 40 years of age to secure their income after an economic layoff. In 1994, a new “Règlement Grand-Ducal” set the terms and conditions up until 2017, when the Supreme Court was invoked.
A "trick" for Nicolas Schmit
In their rulings of 2 March 2018, the magistrates considered that this regulation did not comply with Article 11 of the Constitution, according to which "the law governs the principles of social security, health protection, workers' rights, the fight against poverty and the social integration of citizens with disabilities". Ten days later, the new law was passed.
This is not, as it might appear, an unprecedentedly fast reaction by the legislator to a ruling of the Constitutional Court: The reform of the re-employment aid was initiated well before the outcome of these court cases. The “Programme de Gouvernement” written by the DP-LSAP-Déi Gréng government for 2013–2018 planned to reform this scheme "in order to optimise re-employment assistance and avoid abuses" by "encouraging employers to pay employees receiving this assistance fair remuneration in relation to the salary scale normally applicable in their company".
The Minister of Labour and Employment at the time, Nicolas Schmit (LSAP), now European Commissioner for Employment, Social Affairs and Inclusion, therefore set about revising this forty-year-old and above all costly scheme. Its costs exceeded € 40 million in 2010 for 5,024 beneficiaries. After peaking at almost € 48 million in 2013 for 3,996 beneficiaries, it dropped to € 42.8 million in 2017.
In a parliamentary commission, the socialist minister had somewhat inflated these figures, mentioning aid costing "€ 50 million per year with an upward trend". He had above all highlighted the "unacceptable" situation of companies paying their employees minimal wage while having the State to pay a much higher sum, which was tantamount to having the State subsidise said salary. The Minister wanted to put an end to this "scheme" between the employee and the employer, in which each found an advantage.
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Re-Employment Aid in Need of Aid
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