Financial hardship during unemployment in Norway: the impact of public and private income support

It is common to assume that long-term unemployment no longer causes financial hardship because of generous welfare benefits. It is further assumed that unemployment benefits have eroded the traditional role of the family in protecting its members against hazards. This panel study of long-term unemployed people in 1991-1992 demonstrates the inadequacy of unemployment benefits and the importance of family support in reducing the risk of financial hardship. Vulnerable household types, such as single people and families with limited economic resources, at the outset seem unable to bear the personal risk of unemployment that is built into the benefit scheme. Persons disadvantaged at the outset risk a downward spiral because of long-term unemployment. Especially during times of high unemployment, the compensation level is not optimal from a welfare point of view. Greater coverage and more generous unemployment benefits may help unemployed people to cope better financially and thus avoid applying for discretionary and highly stigmatized social assistance allowance.