6 - Labor Market Risks

Summary

Chapter 6 focuses on labor market developments and preferences for unemployment policies. Using data from Germany, we show that increasingly, labor market risks can be predicted with a small set of observables (education, occupation, and location), while the relevance of private information has declined over time. Polarization over unemployment policies has risen at the same time. We also explore – theoretically and empirically – how people translate their labor market situation into political preferences and show the importance of social networks in the process. Lastly, the chapter describes a case study of a fascinating reform in the Swedish unemployment insurance system, which shows what happens when unemployment insurance contributions and benefits are tied to unemployment risk, as would happen in a private market. Thus, the Swedish case provides a window into the (possible) future of segmented social policy programs that we predict will become more commonplace.