ANN ARBOR—A wife’s income has little impact on helping her family make ends meet when her husband is laid-off, especially if he receives state unemployment benefits, says University of Michigan economist Julie Berry Cullen.

Instead, couples rely more on unemployment checks and family savings to help get them through the husband’s period of joblessness. In fact, Cullen says, the greater the husband’s unemployment income, the less money the wife earns—if she’s already working, that is. If not, then she is even less likely to get a job while her husband is laid-off than when he is.

“In the absence of private financial markets for insuring unemployment, a natural presumption is that other forms of insurance will arise to smooth the family’s consumption over this adverse shock,” says Cullen, an assistant professor of economics. “One source of such insurance is spousal labor supply.

In a new study that looks for the first time at how a husband’s receipt of jobless benefits affects the employment and earnings of his wife, Cullen and colleague Jonathan Gruber of the Massachusetts Institute of Technology found a large “crowd-out” effect of unemployment insurance—for every dollar of jobless benefits their husbands receive, wives earn 67-73 cents less.

According to the study—a national survey of married couples, aged 25-54, with more than 2,500 episodes of unemployment from 1983 to 1993—for every $100 in unemployment benefits received by their spouses, wives work nearly 50 fewer hours per month and the likelihood that they will work at all is lowered by 24 percent.

Cullen says that wives of unemployed husbands who had been high earners are less likely to work and that employment and hours of work are much lower—as much as 50 percent—for women with children, particularly young children.

While working wives of unemployed men work, on average, 17 hours a month more than working wives of employed men, they would work about 30 percent more hours if their non-working husbands were not eligible for unemployment insurance, Cullen says. Likewise, the unemployment rate of wives with out-of-work husbands not getting jobless benefits would drop by almost 45 percent.

“Our total hours estimates imply that wives would make up only 13 percent of the husband’s lost earnings,” Cullen says. “While the crowd-out is substantial, the replacement of lost earnings associated with eliminating unemployment insurance is small because unemployment insurance replaces only a small share of workers’ income and wives earn much less than their husbands.”

The effect, she adds, is much larger for families for whom the unemployment spell is unexpected, which is consistent with the notion that couples who anticipate the husband’s lay-off use other means to get by during that time.

“Our findings point out a limitation in previous work on labor supply effects of the unemployment insurance system, which has focused solely on the unemployed worker,” Cullen says. “Our results also indicate that the effect on secondary earners from unemployment insurance benefits variation may be quite important, at least in terms of total hours of work.

“While we find a sizeable ‘crowd-out,’ our estimates also suggest that in the absence of unemployment insurance, there would still be a large reduction in family income from the unemployment of the husband. Thus, spousal labor supply only provides, at best, partial insurance against the income risk from unemployment.”

Cullen and Gruber, whose study will appear in a forthcoming issue of the Journal of Labor Economics, acknowledge that focusing on wives as secondary earners may be “somewhat anachronistic” in light of the increasing numbers of married women in the work force. However, they found that among 87 percent of married couples in their sample, the husband earns more than the wife, and among 73 percent, the husband works more hours.