Buffering income loss due to unemployment: Family and welfare state influences on income after job loss in the United States and western Germany

Abstract

This article analyzes how the family and the welfare state influence household income trajectories after job loss in the United States and in western Germany. Drawing on panel data from the Panel Study of Income Dynamics (PSID) and the German Socio-Economic Panel (GSOEP), I study the income buffering effects of the family and the welfare state in the short an in the long run after job loss. I demonstrate that household income trajectories after job loss in the two countries are similar for couple households. However, men in the United States rely relatively more on family resources to overcome income loss, whereas German men’s incomes are secured mostly by the welfare state. Women’s unemployment in both countries is mainly buffered by their partners’ higher earnings. Because single households have no access to family support, they face much higher losses in the United States than in Germany. I also show that the more generous German welfare state triggers less private self-help in the form of increased labor force participation on the part of women when their partners lose their jobs. Over time, the family has become more important in buffering incomes after job loss in the United States which smoothed men’s and roughened women’s income trajectories in couple households. In Germany, worsening re-employment chances increased income losses in the long run after job loss.