No stratified effect of unemployment on incomes. How the market, state and household compensate for income loss in the UK and Switzerland

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This paper looks at the loss of income in the two years after unemployment in the UK and in Switzerland and finds that while lower income groups are more vulnerable to becoming unemployed they are not necessarily more vulnerable to its consequences.

The researchers used data on more than 35,000 people who took part in the UK Under-standing Society study between 2009 and 2017, and on a smaller sample of 4,500 people who were in the Swiss Household Panel between 1999 and 2017. They looked at the loss of income caused by unemployment, both for individuals and for households, and how that was mitigated by state benefits.

The results showed that in the year of becoming unemployed, there was a 55% loss of individual employment income in the UK and a 20% loss in Switzerland. In year two the loss was 29% in the UK and 25% in Switzerland. The total household losses were lower in both countries.

State benefits had only minimal impact in the UK but in Switzerland they reduced the fi-nancial impact of unemployment by half.

In Switzerland there were no clear differences in income loss across social classes, but in Britain the earnings losses were greater for those in the upper-middle classes. The authors suggest this may be due to a ‘floor’ effect in which the state provides the same safety net regardless of previous income.

The researchers conclude that contrary to expectation, those in advantageous class positions do not fare best when unemployed.

But there are large country differences in how unemployed workers are buffered against falling incomes. While the Swiss welfare state reduces income loss the British welfare state provides minimal protection. Unemployment in the UK is a critical life event in which the state offers little help and which exposes people from all social backgrounds to great economic insecurity