Reconciling Workless Measures at the Individual and Household Level: Theory and Evidence from the United States, Britain, Germany, Spain and Australia

Individual and household based aggregate measures of worklessness can, and do, offer conflicting signalsabout labour market performance. We outline a means of quantifying the extent of any disparity,(polarisation), in the signals stemming from individual and household-based measures of worklessness andapply this index to data from 5 countries over 25 years. Built around a comparison of the actual householdworkless rate with that which would occur if employment were randomly distributed over householdoccupants, we show that in all the countries we examine, there has been a growing disparity between theindividual and household based workless measures. The polarisation count can be decomposed to identifywhich household groups are exposed to workless concentrations and can also be used to test whichindividual characteristics account for any excess worklessness among these household groups. We showthat the incidence and magnitude of polarisation varies widely across countries, but that in all countriespolarisation has increased. For each country most of the discrepancies between the individual andhousehold workless counts stem from within-household factors, rather than from changing householdcomposition.