Development Vulnerability, Unemployment and Poverty: A New Class of Measures, Its Axiomatic Properties and Applications*

Measures of unemployment and poverty have tended to focus solely on those currently unemployed or below the poverty line, ignoring people who are vulnerable to becoming unemployed or falling into poverty. Current literature and policy discussion in this area tend to assume that since vulnerability causes pain, taking account of vulnerability will make effective unemployment and poverty higher. This paper argues that, at the aggregate level, vulnerability should be viewed as 'good ' because, with unemployment constant, the presence of vulnerable people mean that there must also exist currently unemployed people who expect to find work in the near future. Hence, a higher vulnerability simply means that the burden of unemployment is more widely shared in society. We develop a new class of measures of effective unemployment, which takes account of this normative stance, derive its axiomatic properties and apply it t