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

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  • Marcus Eliason

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.

Suggested Citation

  • Marcus Eliason, 2011. "Income after job loss: the role of the family and the welfare state," Applied Economics, Taylor & Francis Journals, vol. 43(5), pages 603-618.
    • Handle: RePEc:taf:applec:v:43:y:2011:i:5:p:603-618
    DOI: 10.1080/00036840802584968
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    References listed on IDEAS

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    1. Bertil Holmlund, 2003. "The Rise and Fall of Swedish Unemployment," CESifo Working Paper Series 918, CESifo.
    2. Huttunen, Kristiina & Moen, Jarle & Salvanes, Kjell G., 2006. "How Destructive Is Creative Destruction? The Costs of Worker Displacement," IZA Discussion Papers 2316, IZA Network @ LISER.
    3. Aedin Doris, 1999. "The Means Testing of Benefits and the Labour Supply of the wives of Unemployed Men: Results from a Fixed Effects Model," Economics Department Working Paper Series n930999, Department of Economics, National University of Ireland - Maynooth.
    4. Peter J. Kuhn (ed.), 2002. "Losing Work, Moving On: International Perspectives on Worker Displacement," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number lwmo.
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