HLEG thematic workshop on Economic Insecurity, 4 March 2016, New York, United States. More information at: http://oecd/hleg-workshop-on-economic-insecurity-2016

1. Economic Insecurity:
What Is It? (And Is It and It?) And
Why Should We Care About It?
Jacob S. Hacker
Yale University

3. Insecurity: Growing Research
Focus
Big, increasingly solid findings
1. Loss aversion
2. Cognitive/emotional
barriers to accurate
perception and adequate
preparation
3. Pervasive
failures/shortcomings of
insurance/credit markets
(not to mention basic
personal/social network
resource constraints)
Big changes in economy/family
1. Shifts in labor market due
to technological
change/foreign
competition/deindustrializat
ion = inequality and
insecurity
2. Movement of women into
workforce/declining family
stability
3. Erosion (with big
exceptions) of America’s
public-private welfare
regime, esp. private side

4. What is Economic Insecurity?
• The degree to which individuals (or
families/households) are protected against
hardship-causing economic losses without
adequate protection.
• Hendren: “The degree to which individuals (or
families) would be willing to pay a markup over
actuarially fair rates to move money across
realizations of future events.”

5. Some questions
• Role of individual psychology
• Psychological state is insecurity
• Psychological state is response to insecurity
• Whatever! Two alternative ways to measure
• How to account for prospective character of insecurity?
• We (often) don’t see prospects, we see experiences
• Global or domain-specific phenomenon?
• “job insecurity,” “retirement security,” etc.
• Must economic events be “involuntary”?
• “Involuntary” is in the eye of the beholder…

6. Measurement (Is It an It?)
Objective Subjective
Index Multiple aggregated
measures (e.g., Osberg)
-generally domain-specific
Multiple aggregated
survey responses
Integrated Single measure (generally
“realized risk” – e.g.,
Hacker et al.) income
(“available” income),
consumption, wealth
Single measure (worry,
estimated probability,
willingness to pay(?))
Domain-Specific
Integrated
Single measure within
domain (e.g., Munnell et
al. “Retirement Risk
Index”)
Single measure within
domain (worry, estimated
probability) (e.g.,
Hendren,
Hacker/Rehm/Schlesinger
)

7. Why Should We Care?
1. Both prospect and experience of loss imposes
hardship (how close to subjective well-being?)
2. Major influence on economic behavior: e.g.,
investment in human capital, labor/geographic
mobility, willingness to take risks
3. Government spends a lot to address insecurity
4. Closely linked to inequality—impact of economic
standing on life chances, aspect of inequality
(inequality of risk of loss)
5. Huge influence on politics and policy

8. Fueled by insecurity?

9. Now for something a little
more inspiring
“There is still today a frontier that remains
unconquered—an America unclaimed. This
is the great, the nationwide frontier of
insecurity, of human want and fear. This is
the frontier—the America—we have set
ourselves to reclaim.”
—FDR on the third anniversary of
the Social Security Act