No Stratified Effect of Unemployment on Incomes: How the Market, State, and Household Compensate for Income Loss in the United Kingdom and Switzerland

Link to Publication (External Site)

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 Understanding 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 two years following unemployment, individual work income fell by 25 and 55% in the UK and by 20 and 25% in Switzerland. The income losses at the household level were lower in both countries.

State benefits had only minimal impact in the UK, but in Switzerland they reduced the financial impact of unemployment by half.

In Britain and Switzerland, income losses did not differ much across social classes. If anything, losses were smaller in the working class.

The researchers conclude that, contrary to expectation, individuals in advantageous class positions who become unemployment are just as vulnerable to its consequences as individuals in less lower classes.

However, there are large country differences in how unemployed workers are buffered against falling incomes. While the Swiss welfare state clearly 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.