Family Welfare and the Cost of Unemployment

Hotchkiss, Julie L.; Moore, Robert E.; Rios-Avila, Fernando

Working Paper

Family Welfare and the Cost of Unemployment

Abstract: This paper calculates the cost of an unemployment shock in terms of family welfare. We find that, overall, families face an average annualized expected dollar equivalent welfare loss of $1,156 when the unemployment rate rises by 1 percentage point. The average welfare loss for married families is greater than for single families and increases with education. We then estimate that a 1.8 percent shock to purchasing power would generate the same amount of overall welfare loss as a one-percentage-point rise in the unemployment rate.

Keywords: family welfare; joint labor supply; microsimulation dual mandate; monetary policy;

JEL Classification: D19; E52; I30; J22;