Unemployment Benefits and Poverty in OECD Countries: The Role of Basic Security and Progressiveness of Income Replacement

The great recession brings to life the old question about income protection for the unemployed. In this study we analyze the link between poverty and unemployment insurance benefits in a comparative and longitudinal perspective. Two distinct but often overlooked dimensions of unemployment insurance benefits are explored; degree of basic security and progressiveness of income replacement. Based on the OECD Benefits and Wages dataset and the Luxembourg Income Study, we estimate a number of structural equation models of poverty on unemployment benefits including 27 countries for the period 2000-2010. Based on the political economy of welfare state reform, we expect that anti-poverty objectives are linked to middle-class interests, where effects of the former are enhanced if social protection successfully addresses the demand for income replacement among higher wage-earners. Results confirm this working hypothesis as progressiveness of income replacements is indirectly linked to poverty by increased generosity of benefits for lower wage earners.