Youth living arrangements and household employment deprivation: Evidence from Spain

Objective: We study the role of employment deprivation and severe poverty at the household level on youth living arrangements in Spain in three different business cycle periods. Background: Previous evidence has shown that recessions in Southern European countries make young individuals turn to their families for financial protection. Most analyses assume that these cohabiting decisions are only related to the young individual's employment status while other household members’ employment deprivation is irrelevant. Method: We use information from the Quarterly Labour Force Survey between 2005 and 2017 and a very flexible indicator to measure the dimension of employment deprivation at the household level and estimate its role on the probability of being emancipated with a linear probability model. To avoid reverse causation, we also estimate two seemingly unrelated regressions of the probability of cohabiting with parents and the dimension of household employment deprivation. Results: Our results confirm that the Great Recession increased the probability of parental co-habitation, even if with some delay in relation to the business cycle. We reject the assumption about the irrelevance of other household member’s employment deprivation on youth cohabitation decisions because its dimension determines them. Conclusion: Policies aiming to improve emancipation should not only increase youth labour market opportunities but provide either more employment hours or more income transfers to those living in households where young individuals live.