A new study from the University of Oxford finds that UK families lose nearly 20% of their income in the first year after a job loss, significantly more than families in Denmark, Finland, and Germany. The research, published in Socio-Economic Review, points to weaker unemployment benefits and lower-quality re-employment as key reasons for this disparity.
The study shows that while Danish, Finnish, and German households experience a 5-6% drop in income after job loss, UK households face a 17% reduction. Over five years, the cumulative loss for UK families rises to about 35%, which is more than double what families in Finland or Germany experience.
Dr Selçuk Bedük, Departmental Lecturer in Comparative Social Policy at Oxford’s Department of Social Policy and Intervention (DSPI), said: "While job loss is an everyday reality, our research shows the financial fallout differs greatly between countries. After a job loss, unemployment insurance is crucial in cushioning immediate income losses, while re-employment is most effective solution both in the short- and long-term. Yet the UK is lagging behind when it comes to quality of re-employment and generosity of benefits."
He added: "The proposed Unemployment Insurance, while a step forward, would still provide only a third of the earnings of a full-time minimum wage worker. In most countries, replacement rates reach 60-80%.
"A strong unemployment insurance is a crucial tool for reaching a more dynamic labour market where workers can move between jobs, contributing to productivity and growth. While a generous scheme might come with a budget cost, it can help with current government’s priorities on growth."
The report identifies two main factors behind these findings. First, UK unemployment benefits replace only about 20% of previous earnings for up to six months; other countries provide 60-80% for up to two years. Second, although most people in Britain find new work within a year after losing their job, they often return to positions paying around 40% less than before—almost twice the pay cut seen elsewhere.
The study also found that many UK families try to make up for lost income by working extra hours or taking additional jobs. These efforts offset about 22% of initial losses—a much higher rate than seen in Denmark or Finland (1-3%) and double that of Germany (11%).
Researchers recommend strengthening unemployment insurance by increasing benefit levels and extending their duration to better protect British households from the financial impact of job loss.
This research was conducted with collaborators from Humboldt University, University of Bristol, The Danish Centre for Social Science Research, Max Planck Institute for Demographic Research and University of Turku.