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Prepared by Jimmy McHugh.
The unemployment vacancy curve is sometimes referred to as the Beveridge curve.
The vacancy rate is normally defined as the number of vacancies available as a proportion of total employment.
This is a contentious assumption. If changes in unemployment are primarily due to inflows rather than outflows, then unemployment will move independently of vacancies, changes in the efficiency of the labor matching process, and labor mismatch. Few countries produce reliable, consistent inflow series. However, Layard and others (1991) report that inflow rates tend to be high in North America, and low in the EU, Scandinavia, and Japan. There is no reliable inflow data available in Portugal.
Portugal provides two types of benefits for the unemployed: the unemployment subsidy and the unemployment social subsidy. The value of both these benefits is tied directly to the minimum wage. The unemployment subsidy is a contributions-based benefit. The decree-law No. 79-A/89 which was passed in March 1989 eased the eligibility requirements and extended the duration of benefits. Under the previous law an unemployed person could only claim benefits if they had made contributions for at least 36 consecutive months. Under the 1989 law, an unemployed person would be eligible if they had made 18 months contributions over the proceeding 24 months. The 1989 benefits law introduced a sliding scale of benefit duration linked to the age of the worker. The minimum level of duration was set at 10 months for workers aged 25 or under, rising to 30 months for workers who are 55 and over. The previous system set a minimum benefit duration of 6 months plus an additional month for each 12 months of employment with a record of wages earned. The 1989 law also increased generosity of the unemployment social subsidy. Unemployed people with four or more dependents could claim a benefit equal to 100 percent of the minimum wage. Previously, only people with 6 or more dependents could claim this level of benefits. Benefit duration of the social subsidy was also extended and harmonized with the general unemployment subsidy.
There are two possible explanations for this result.
OECD data shows that Portugal has the sixth highest benefit replacement ratio, (defined as benefits before tax as a percent of previous earnings before tax).