Measuring (In)Security in the Event of Unemployment: Are We Forgetting Someone?

Abstract

In this paper we argue that the consequences of the unemployment risk may be quite different according to the number of household members who depend on the income of the earners. We propose new measures for the aggregate economic (in)security related to employment risk, that take into account the household composition: a per‐earner amount corresponding to the aggregate equivalent expected loss, and the inactive‐unemployed dependency rate (IUDR), i.e. the average number of persons not in the labor force that each unemployed has to provide for (beyond herself). Both have a simple interpretation but the latter has an advantage in terms of data‐requirement. Our results suggest that the overall level of insecurity associated with similar unemployment and replacement rates increases if we consider all the individuals in the households that are potentially affected by this risk. Moreover, the use of net rather than gross incomes and of micro‐level data changes quite significantly the relative position of countries in terms of insecurity levels.