Économie et Statistique n° 349-350 - The European panel: a new statistical source on households
The Influence of Precautionary Savings on Job Seeking
Lack of available data has hitherto limited the study of the effect of unemployment insurance mechanisms on the labour supply to the social security system in the form of unemployment benefits. However, the 1990s saw more and more households building precautionary savings to round out the partial compensation provided for by this system. For one of the first times ever, the European Household Panel is used to measure the impact of this self-insurance on the unemployed's labour supply behaviour using information on job seekers' working patterns, incomes and assets. These precautionary savings enable the unemployed to be more selective in their job seeking: the higher the savings, the higher the minimal wage required to accept a job offer (reservation wage). Job seekers without savings remain unemployed longer than those with savings. However, the higher the level of savings, the longer the period of unemployment. Nevertheless, this influence is only significant above an assets level of 4,600 euros (30,000 French francs), which is more or less equivalent to one year of unemployment benefits on average. Hence these precautionary savings only affect the job-seeking strategies of those with savings levels equivalent to unemployment benefits. As regards the type of savings, only the savings passbook system provides the level of liquidity required to play the role of precautionary savings guarding against labour market risks.