Presentation of the key findings from the OECD report: On Shaky Ground? Income Instability and Economic Insecurity in Europe

1. © OECD |
INCOME INSTABILITY AND
ECONOMIC INSECURITY IN
EUROPE
ON SHAKY GROUND?
KEY FINDINGS

2. © OECD |
Economic insecurity is a growing concern
Economic insecurity refers to a drop of income in
combination with a lack of liquid assets
Economic insecurity emerged as a concern during the Global
Financial Crisis and never dissipated completely
Recent shocks, including the cost-of-living crisis, are further
increasing the risk of economic insecurity
Megatrends transforming labour markets bring in more
unpredictability for workers even beyond crises
Economic insecurity has far-reaching negative effects on
people’s well-being and society – affecting living standards,
physical and mental health, education outcomes, and general
economic activity
On Shaky Ground? Income Instability and Economic Insecurity in Europe
Figure 1. Shocks are more common and living standards have not
grown as fast as in the past
See note to figure 1.1 in the report. Source: European Union Statistics on Income and Living Conditions
(EU-SILC).
$ 0
$ 5,000
$ 10,000
$ 15,000
$ 20,000
$ 25,000
$ 30,000
$ 35,000
$ 40,000
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
Falls in real GDP pc (euro area) Falls in real GDP pc (OECD + euro area)
Real GDP per capita (euro area) Real GDP per capita (OECD)

3. © OECD |
On Shaky Ground? Income Instability and
Economic Insecurity in Europe
How market incomes change over the years and month-to-
month
Households’ capacity to withstand income volatility and
negative shocks
Polices that can assist households in reducing and managing
risks by improving the timeliness of social protection
systems and assisting people in building financial buffers
On Shaky Ground? Income Instability and Economic Insecurity in Europe
This report provides new evidence on:

4. © OECD |
Study of income instability and episodic poverty
Combining income instability and financial fragility (i.e. the lack of sufficient liquid assets to cope
with temporary income losses) to assess the prevalence of broader economic insecurity
Policy insights: how to mitigate economic insecurity
This presentation provides highlights on income instability, economic insecurity and some of the
policy recommendations outlined in the report
How the report’s analysis and messages are structured:
On Shaky Ground? Income Instability and Economic Insecurity in Europe

5. © OECD |
The report uses a novel methodology:
The variation in monthly income for working-age households in EU OECD countries, which is not
typically tracked, is analysed using the EU-SILC (which records job status each month)
The adequacy of liquid assets to smooth income is analysed using the HFCS (which provides
information on asset holdings)
Microdata from the EU-SILC and the HFCS are then matched to provide information on both
(predicted) income changes and liquid assets
On Shaky Ground? Income Instability and Economic Insecurity in Europe

6. INCOME INSTABILITY
INCOME INSTABILITY

7. © OECD |
Income changes are frequent…
Monthly changes account for 40% of total income
instability – indicating that employment status changes
are frequent
Only one-fifth of people that changed employment
status experienced an upwards trend in income, while
the majority saw their incomes decrease or fluctuate
with no discernible trend (i.e. income volatility)
People in the bottom income quintile are more likely
to experience income instability, which inhibits their
upward social mobility, and likely contributes to rising
inequality at a country level
On Shaky Ground? Income Instability and Economic Insecurity in Europe
Figure 2. Low-income and downwardly-mobile people have highly
unstable incomes, averaged over 48 months ending 2016-18
See note to Figure 1.5 in the report. Source: European Union Statistics on Income and Living Conditions
(EU-SILC).
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Stayed Moved up Moved down Stayed Moved up Moved down Stayed
Bottom quintile Middle quintiles (2-4) Top quintile
Downward mobility and volatility Upward mobility

8. © OECD |
…and often lead to episodes of poverty
One-third of people spend (at least) a few months
in poverty
Of these people, 20% spend less than a year below
the poverty line; 43% are chronically poor
Savings are used to cushion short poverty spells, but
they are not equally available to all households, as
shown in the next slide
On Shaky Ground? Income Instability and Economic Insecurity in Europe
Figure 3. One-third of individuals in working-age households spend at
least a few months in poverty, averaged over 48 months ending 2016-18
See note to Figure 1.8 in the report. Source: European Union Statistics on Income and Living Conditions
(EU-SILC).
0
5
10
15
20
25
30
35
40
45
Chronic poverty Year-long poverty
Episodic poverty Annual market income poverty rate

9. INCOME INSTABILITY
ECONOMIC INSECURITY

10. © OECD |
Many households face income shocks and lack the
liquid assets to withstand these shocks
On Shaky Ground? Income Instability and Economic Insecurity in Europe
The economically insecure are defined as being both
exposed and vulnerable to income shocks; i.e. they
have highly unstable (predicted) income AND
insufficient assets to stay out of poverty for 3 months
Almost 1 in 6 people are economically insecure
Another 1 in 8 have unstable incomes, but sufficient
assets currently (although they are at risk of insecurity
in the future)
Figure 4. Almost one in six people in working-age households are
economically insecure, averaged over 48 months ending 2016-18
See note to Figure 2.4 in the report. Sources: European Union Statistics on Income and Living
Conditions (EU-SILC) and the Eurosystem Household Finance and Consumption Survey (HFCS).
0%
10%
20%
30%
40%
SVK
AUT
LUX
DEU
PRT
POL
BEL
FRA
OECD
15
EST
IRL
ITA
ESP
GRC
HUN
LVA
Economically insecure ↗ Not financially fragile, highly unstable

11. © OECD |
Who are the economically insecure?
On Shaky Ground? Income Instability and Economic Insecurity in Europe
Young people, the unemployed and those with
insecure work are most likely to experience economic
insecurity
Households with lower employment intensity (with a
single earner or when both adults lack employment
security) also face higher economic insecurity
Experiencing economic insecurity in the present is also
correlated with a higher self-assessed probability of
job loss in the next year
Figure 5. The economic insecurity penalty associated with
employment varies across countries, averaged over 48 months
ending 2016-18
See note to Figure 2.6 in the report. Sources: European Union Statistics on Income and Living
Conditions (EU-SILC) and the Eurosystem Household Finance and Consumption Survey (HFCS).
0%
10%
20%
30%
40%
50%
60%
SVK
GRC
PRT
FRA
ESP
LUX
AUT
POL
ITA
DEU
IRL
EST
BEL
HUN
LVA
Unemployment Insecure work Young

12. © OECD |
Occupations with higher shares of economically insecure workers are
less likely to reap the benefits of AI and are more at risk of automation
On Shaky Ground? Income Instability and Economic Insecurity in Europe
Workers with a higher risk of automation face higher
economic insecurity
Some (e.g. trade workers) have many viable career
transitions in case their occupation becomes obsolete,
but others (e.g. elementary occupations) do not
Workers with lower economic insecurity are more
exposed to AI, but thus far AI has complemented their
labour and increased their wages and employment
Figure 6. Association between automation and economic insecurity
Economic insecurity over 48 months ending 2016-18; automation score based on Lassébie and Quintine
(2022[20]) and career transitions based on Kanders et al (2020[21]). See note to Figure 2.8 in the report.
Sources: European Union Statistics on Income and Living Conditions (EU-SILC) and the Eurosystem
Household Finance and Consumption Survey (HFCS).
Managers
Professionals
Technicians
Clerks
Service workers
Skilled agr.,
forestry and
fishery workers
Craft and related
trade workers
Plant and machine operators, and assemblers
Elementary
occupations
2
2.1
2.2
2.3
2.4
2.5
2.6
2.7
0% 5% 10% 15% 20% 25% 30% 35%
Share of economically insecure workers (household heads)
Job automation score

13. INCOME INSTABILITY
HOW CAN POLICY
MITIGATE ECONOMIC
INSECURITY?

14. © OECD |
Policies should work in concert to combat
economic insecurity
Maintain strong economic conditions
Invest in skills, health and job programmes
Improve social protection systems
Encourage secure employment and collective bargaining
Invest in climate change mitigation and
adaptation
Reduce individual
over-indebtedness
Improve savings
schemes
Unlock equity in
illiquid assets
Enable low-cost
lending
Improve financial
literacy and advice
Target subsidies for
essentials
Reduce probability of adverse
shocks
Support people with insecure
incomes
Increase financial resilience
Policies
addressing
multiple
aspects
of
economic
insecurity
Policies
addressing
a
single
aspect
Aspects of
economic
insecurity
Timeliness
On Shaky Ground? Income Instability and Economic Insecurity in Europe

15. © OECD |
Unemployment benefits reduce instability by 22%
across European OECD countries
Old-age benefits also reduce instability by 18%
even in working-age households – benefitting the
entire family even if household head is not retired
Due to data limitations, these estimates do not cover
other important benefits such as child benefits or
cash transfers
On Shaky Ground? Income Instability and Economic Insecurity in Europe
Figure 7. Social benefits reduce instability by 40% on average
Analysis over 48 months ending 2016-18. See note to Figure 3.2 in the report. Source: European Union
Statistics on Income and Living Conditions (EU-SILC).
0
0.1
0.2
0.3
0.4
0.5
0.6
CZE
CHE
NOR
SVK
SVN
LUX
FRA
DEU
ITA
LVA
AUT
PRT
OECD
21
POL
HUN
LTU
BEL
EST
GRC
IRL
ESP
GBR
Market income Plus unemployment benefits
Plus old-age benefits Plus educational allowances
Social protection systems can help smooth
unstable incomes…

16. © OECD |
… but their timeliness could be improved
Frequent social protection payments promote income smoothing and can help people manage their
finances
In contrast, annual tax credits can undermine financial stability and make it difficult to pay bills or
purchase essentials
Waiting periods for benefits need to be carefully designed to promote job stability, while avoiding
causing financial distress
Social protection means testing should be simplified and payments should be more accessible
On Shaky Ground? Income Instability and Economic Insecurity in Europe
The report specifically looks at policies to improve the timeliness of social protection:

17. © OECD |
Other policies can help people self-insure against
income loss
Target savings schemes to low-income earners – e.g. matched contributions, prizes or guaranteed
interest rates instead of tax-based schemes; and keep progressivity in mind
Tailor financial literacy and advisory programmes to people’s needs and circumstances – for the
young or those with low incomes; at key financial decision-making points (eg retirement)
Enable low-cost financial services (eg credit unions) through regulation and use tools such as data
mining and predictive models to identify people before they become over-indebted
Design debt relief schemes carefully in term of hurdles, types of forgivable debt types, eligibility and
payment plans
On Shaky Ground? Income Instability and Economic Insecurity in Europe
Additional policies that should be seen as complements to social protection are:

18. © OECD |
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https://www.oecd.org/wise/
The OECD Observatory on Social Mobility and Equal Opportunity:
https://www.oecd.org/wise/observatory-social-mobility-equal-opportunity/
https://www.oecd.org/stories/social-mobility/
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On Shaky Ground? Income Instability and Economic Insecurity in Europe
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