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Income after job loss: the role of the family and the welfare state

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Eliason, Marcus

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Abstract That displaced workers suffer long-lasting earnings losses is a stylized fact, raising the question whether these losses are replaced by other means. For married men, increased labour supply by the wife may be one way. Another possibility is that the public welfare system offsets the same losses. I used a Swedish longitudinal data set containing married couples where the husband was either employed or made redundant in 1987 by an establishment closure. There was no evidence that husbands' job loss positively affected wives' annual earnings. Although husbands' utilization of unemployment insurance increased significantly, government transfers including also sickness insurance, disability insurance, and means-tested social benefits, did not fully replace husbands’ long-run earnings losses. Hence, displaced workers seem to suffer also from long-lasting losses in family income, which in many respects is a better measure of economic welfare than individual earnings or wages.
Classification Social Security; Labor Market Research
Free Keywords job displacement; added-worker effect; social security; income replacement; plant closure
Publication Year 2009
Page/Pages p. 603-618
Journal Applied Economics, 43 (2009) 5
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)