On Shaky Ground? Income Instability and Economic Insecurity in Europe
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Over the past few decades, economies and technologies have changed in ways that have made people’s economic prospects more insecure. While non-standard work and digital transformation have created opportunities for many, they have also exposed individuals to fluctuations in their incomes, known as "income instability", as have major recent shocks. Recognising that individuals’ jobs and circumstances can change multiple times in a year, this report uses novel techniques to identify who is most exposed to income instability in European OECD countries and examines the effects it has on their lives, social mobility, and inequality. Income instability can be difficult to manage for individuals who lack the financial resources to smooth their incomes. In this report, people facing the twin problems of exposure and vulnerability to income instability are considered to be economically insecure. Economic insecurity falls predominantly on people with weak attachments to the labour force and on those who are not well-placed to leverage the benefits of digitalisation. People at risk of economic insecurity are more likely to worry about losing their jobs in the future than economically secure individuals and, as shown in other research, experience poor health, food insecurity, and poor childhood development outcomes, which can impede social mobility. Finally, the report reviews a range of policies to improve the timeliness of social protection to better support people with highly unstable incomes and explores options to help those most at risk of economic insecurity build financial buffers.
Also available in: French
Economic insecurity
When individuals have highly unstable incomes and do not have the financial means to cope, they are said to be economically insecure. Economic insecurity is thus marked by an exposure, and a vulnerability to income instability. While low-income individuals are the most vulnerable to income shocks – in terms of having insufficient liquid assets to draw on – almost 50% of people on middle incomes in working-age households and 20% of higher income earners are at risk too. Given the frequency with which people experience income shocks, and the inadequacy of people’s financial buffers, economic insecurity affects one in six people in working‑age households in European OECD countries. The burden of economic insecurity falls predominantly on the unemployed and insecure workers, who are likely to face a heightened risk of economic insecurity going forward, given the digital transformations occurring in labour markets, which appear to affect people disproportionately and negatively in occupations with already high rates of economic insecurity
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