The Wealth of the unemployed
Many studies have investigated the adequacy of unemployment insurance (UI) benefits as a form of income replacement, but few have looked at other resources with which the unemployed can finance their unemployment spells. This paper focuses on one form of resources, own wealth holdings. The author finds that the median worker's financial assets can cover roughly two-thirds of the income loss from an unemployment spell. Wealth holdings vary tremendously, however, and almost one-third of workers are unable to replace even 10% of their income loss. Moreover, predicted wealth holdings decline precipitously with realized unemployment durations, both absolutely and (especially) relative to actual income loss. This finding, together with the finding that individuals who are eligible for more generous UI draw down their wealth more slowly than do others during unemployment spells, suggests that UI benefit adequacy could be increased if the benefits were targeted to those with longer unemployment spells. (Author's abstract.)
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Volume (Year): 55 (2001)
Issue (Month): 1 (October)
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