Description:
This paper calculates the cost of an unemployment shock in terms of family welfare for married and single families separately and by education level. We find that, overall, families face an average annualized expected dollar equivalent welfare loss of $1,156 when the unemployment rate rises by 1 percentage point. The average welfare loss for married families is greater than the average loss for single families and increases in education. We then estimate that a price level increase of 1.8 percent generates the same amount of welfare loss. We also find that the average welfare loss from a shock to prices versus a shock to unemployment rises with income.