Hidden Unemployment

severe in liberal market economies like the US, Britain, and Australia. Countries like
Denmark and France have been subject to the same economic pressures, but due to
their more "inclusive" (or "egalitarian") labor market institutions, such as centralized and
solidaristic collective bargaining and strong minimum wage laws, they have experienced
less polarization.
Cross-national studies have found that European countries' working poverty rates are
much lower than the US's. Most of this difference can be explained by the fact that
European countries' welfare states are more generous than the US's. The relationship
between generous welfare states and low rates of working poverty is elaborated upon in
the "Risk Factors" and "Anti-Poverty Policies" sections.
The following graph uses data from Brady, Fullerton, and Cross (2010) to show the
working poverty rates for a small sample of countries. Brady, Fullerton, and Cross
(2010) accessed this data through the Luxembourg Income Study. This graph measures
household, rather than person-level, poverty rates. A household is coded as "poor" if its
income is less than 50% of its country's median income. This is a relative, rather than
absolute, measure of poverty. A household is classified as "working" if at least one
member of the household was employed at the time of the survey. The most important
insight contained in this graph is that the US has strikingly higher working poverty rates
than European countries.
Risk Factors
There are five major categories of risk factors that increase a person's likelihood of
experiencing working poverty: sectoral factors, demographic factors, economic factors,
labor market institutions, and welfare generosity. Working poverty is a phenomenon that
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