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Private Forms of Unemployment Protection and Social Stratification
in England and Scotland
Alison Koslowski University of Edinburgh, UK
Welfare Markets and Personal Risk Management
in England and Scotland • Part of a wider project, funded by the UK
research council with colleagues Prof. Jochen Clasen & Dr Traute Meyer– To examine the risk management strategies of British
middle/high income households aimed at protection against potential income loss during and after working lives
– To explore households’ planning for contingencies - e.g unemployment, accidents, children’s education, loss of a home, pensions, need for long term care
Research design
• Documentary analysis and mapping exercise of provision over time (1990s-current)
• Quantitative and qualitative methods to investigate behaviour & attitudes– 70 qualitative interviews of relatively high-income
couples with dependent children– Analysis of government funded Family Resources
Survey & Expenditure and Food Survey as well as data commissioned by the Association of British Insurers
Why compare England & Scotland?
• We like to work comparatively (!)• Scotland has devolved powers in some areas
(although not unemployment benefit)• Political attitudes and voting behavior differ:
Scotland is more left-leaning• Different employment and social mix
Forms of financial protection in the case of not being able to work
• State: income replacement benefits• Family & friends: financial transfers, in kind
benefits• Self-reliance: getting another job, reducing
expenditure• Market: private insurances, investments,
savings, housing equity
Social stratifiers & the relative risk of unemployment
• Risk of income loss due to unemployment is not evenly distributed across society. Is income protection similarly distributed?– Home ownership– Occupation & sector of employment– Education– Wealth– Income– Family status– Gender– Age
Private unemployment protection
• Employer protection – on the decrease, but still very much relied upon by those who have it
• Welfare markets– A certain amount of private unemployment
protection is available, although this remains a niche product (Association of British Insurers, 2010). Certain social groups are more likely than others to take out such private insurance products as part of a ‘security package’ against loss of income in the case of unemployment following redundancy and/or illness.
State and private risk management markets in comparison
Source: ABI and HM Treasury, 2009
Forms of private income protection
(for which data are collected in the FRS) • Personal accident insurance• Private medical (unusual in the UK as we have the NHS
which is free at delivery, private care not always better care, particularly for more serious illness)
• Permanent health insurance• Critical illness cover• Friendly society sickness benefit• To provide an income while in hospital• Nursing home/long-term care• Any other sickness insurance• Unemployment/Redundancy
Percentage of households in England and Scotland paying any* insurance premium
(FRS data, weighted)
Logistic regression: Whether households paid insurance premiums, 2004-5
Household paid premium
Odds Ratio
Robust Std. Err.
Z P>|z| 95% ConfidenceInterval
Scotland 0.69 0.03 -8.69 0.000 0..63 0.75
Couple with children
1.55 0.06 10.66 0.000 1.43 1.68
Age 35-44 1.11 0.05 2.24 0.025 1.01 1.21
Age 45-54 1.14 0.05 2.85 0.000 1.05 1.24
Owns outright
1.97 0.09 14.43 0.000 1.79 2.16
Mortgage 2.79 0.13 21.83 0.000 2.54 3.05
Top 40% bhc
3.42 0.12 35.58 0.000 3.20 3.66
N = 24,875; Pseudo R2 = 0.12Wald chi(7) = 3036; Prob > chi2 = 0.0000
Our “core group”: being most likely to have a ‘security package’
• Scotland & England only• 2 Adults & dependent child(ren)• Age of household reference person 35-54• Home owner (either outright or with a
mortgage)• Falling into top 40% of equivalised total
household income distribution before housing costs
Distribution of Policy Coverage Type Amongst Those Households in England and Scotland with a Insurance Policy (%), 1993-2005
(FRS weighted data)
Different policies have different sets of predictors (FRS, 2004-5)
• Personal accident: more likely if Scottish and renting, in bottom 60%.
• Private medical: more likely if English and a home owner in top 40%
• Permanent health insurance: more likely if English, renting and in top 40%
• Critical illness cover: more likely if Scottish, couple with children, age 35-44, mortgage holder and in top 40%
• Friendly society sickness benefit: less likely if Scottish, age 35-44, more likely if home owner (outright or mortgage) and in bottom 60%
• To provide an income while in hospital: more likely if English, less likely if couple with kids and aged 35-44, less likely if home owner, less likely if in top 40%
• Nursing home/long-term care: Very small sample, no coefficient statistically significant
• Any other sickness: more likely if outright home owner• Redundancy: More likely in Scotland, if couple with
children, less likely if own home outright, less likely if in top40%
Barriers to the development and uptake of private insurance
• Macro (why isn’t the industry/state proportion uniform across sectors?):– Institutional path dependence, political and cultural
norms, electorate expectations and values• Micro (what limits individuals’ uptake?):– Perceptions– Affordability/Existing loans or debts– Financial literacy, ‘responsibility’ & apathy– Access– Consumer trust
Key findings so far
• Our theoretically defined core group is empirically confirmed – they are more likely to participate in private welfare markets
• Interesting consistency of income protection behaviour over time
• Participation in various income protection behaviour is socially stratified
• There does seem to be an English/Scottish split
Further analysis plans
• Expand key explanatory variables to include: employment history and occupation.
• Latent class analysis of the most recent data in order to identify sub-types associated with certain risk management behaviours in order to further our understanding of individuals’ risk management behaviour.