Insured Privately? Wealth Stratification of Job Loss in the UK

Abstract

Job loss is a significant income shock that can lead to declines in living standards and satisfaction. Wealth can provide a key resource in stratifying the risk and the consequences of such an event. In this article, I examine the extent to which wealth stratified the experience of job loss in the UK from 1991 to 2008. I distinguish between different wealth groups using information on homeownership and home value of primary residency, and then study whether these groups face different risks and/or consequences of job loss. The results show that renters were a significantly disadvantaged group compared to homeowners during the observation period. Not only did they faced a significantly higher risk of job loss, they also experienced greater declines in earnings, household income, and life satisfaction, and larger increases in income poverty in the year of job loss. Among homeowners, the risk and consequences of job loss were similar. In a country like the UK with minimal public insurance for unemployment, homeownership appears to provide a significant source of stratification for job loss.

Wealth Stratification and the Insurance Function of Wealth

“…Five of the six studies carry out quantitative data analyses, and one study (Carmichael, 2023) decided on a qualitative research design. Three out of six studies measure wealth in terms of housing wealth (homeownership/tenure status and housing value; see Althaber et al, 2023;Bedük, 2023;Heidenreich & Broschinski, 2023), one study measures it in terms of financial wealth (Rapp & Humer, 2023) and another creates an index to directly measure the insurance capacity of wealth (Gritti et al, 2023). One study investigates high-net-worth individuals (Carmichael, 2023).…”

“…The first two contributions test the insurance function of wealth each for a single country but under very different circumstances: Bedük (2023) tests the insurance function of wealth against job loss in the UK, while Gritti et al (2023) test the insurance function of wealth against the consequences of the Covid-19 pandemic in Italy. Bedük (2023) examines the effect of job loss on several outcomes and its moderation by wealth in the UK with household panel data from 1991 to 2008. The author uses homeownership status and housing values as wealth measures and earnings, net household income, relative and absolute poverty, and life satisfaction as outcomes.…”

Wealth gaps in post-secondary enrolment in Europe? A comparison across European countries and wealth components

“…Third, wealth buffers against the negative consequences of adverse life events (Bedük 2023;Hällsten and Pfeffer 2017;Heidenreich and Broschinski 2023;Mari, Keizer, and Van Gaalen 2023) . The possibility of relying on savings can lower families' level of psychological stress or other related factors, such as behavioral problems or marriage conflict, because they know that they have a financial cushion in times of economic hardship (family stress mechanism).…”