Adaptation to Labor Market Insecurity: The Role of the Economy, the Family, and the State

• In Event: 1483 - Open Refereed Roundtable Session
  In Refereed Roundtable 100min: Table 16. Income Inequality, Market Insecurity, and Risk

Abstract

Family economic insecurity has been on the rise since the 1970s, as large income reductions due to job loss became more prevalent. Economic insecurity can lead to reduced consumption, material hardship, underinvestment in children, among other consequences. However, most existing research focus on the direct effect of job loss on household income and overlook how households, as important risk-pooling units, buffer against income losses. This study builds on DiPrete’s argument that the labor market, the family, and the welfare state interact with each other to affect the mobility trajectory of households, and examines the role of these three institutions in helping households adapting to and recovering from job losses. Using data from the Survey of Income and Program Participation (1986-2013), this study examines whether and to what extent post-job loss households use six buffering mechanisms to cushion income losses. I find that 1) while reemployment, private transfers, and public transfers are common sources of income buffers, existing and new household members also play a not insignificant role; 2) households’ buffering strategy evolve over time, shifting from public (welfare state) and private transfers (kin network) to reemployment and, to a lesser extent, employment of household members (family + labor market); 3) the rate of recovery varies by household composition, as married households are generally able to recover a higher percentage of the lost earnings due to job loss than cohabiting and single households; 4) the relative contribution of each buffering mechanism varies by household composition, as single households rely more on transfers and new household members and less on reemployment or existing household members; 5) wealth, liquid assets such as savings in particular, is another important buffer against job loss. Single households and cohabiting households, who already tend to have weaker income buffers, are less able to benefit from wealth.

Author

• Yuqi Lu, Cornell University