Labor market policies, unemployment, and identity

Abstract

Life satisfaction research in psychology and economics uses various measures of well-being to identify the channels through which unemployment and different types of labor market policies affect an individual's social identity and wellbeing. Bringing unemployed people back to work is much more beneficial than just compensating them for the income loss. A cost-benefit analysis that considers personal identity and subjective well-being provides the necessary base for designing more efficient and effective labor market policies that allow a better balance of active measures such as training schemes and other employment assistance programs for the unemployed that help people to work and passive measures such as unemployment insurance payments that only compensate the unemployed for their income loss. ELEVATOR PITCHUnemployment not only causes material hardship but can also affect an individual's sense of identity (i.e. their perception of belonging to a specific social group) and, consequently, feelings of personal happiness and subjective well-being. Labor market policies designed to help the unemployed may not overcome their misery: wage subsidies can be stigmatizing, measures that require some work or attendance for training from those receiving benefits (workfare) may not provide the intended incentives, and a combination of an unregulated labor market and policy measures that bring people who became unemployed quickly back to work (flexicurity) may increase uncertainty. Policies aimed at bringing people back to work should thus take the subjective well-being of the affected persons more into consideration.

The relationship between unemployment and wellbeing: an updated meta-analysis of longitudinal evidence

“…Accordingly, individuals may affiliate with a social group which represents a social identity that characterizes their attributes as members of that group (Hogg et al, 1995;Hornsey, 2008;Turner & Reynolds, 2010). Studies using social identity approach attribute the unfavourable wellbeing outcomes of unemployment to threatened or lost social identity upon losing a job (see, for example, Cassidy, 2001;Knabe et al, 2016;McFadyen, 1995;Schöb, 2013Schöb, , 2021. By deviating from the social category of "the employed" and breaking the social norm to work, the unemployed individual faces the stigma associated with being unemployed, resulting in lower utility and satisfaction with life (Carroll, 2007;Howley & Knight, 2021;McFadyen, 1995).…”

Well-being costs of perceived job insecurity: Mediating role of financial satisfaction, subjective healthiness and institutional trust

“…Jobless people exposure to depression (Zuelke et al, 2018), have poor mental health (Clark & Oswald, 1994) and low self-esteem ( Van der Meer, Wielers & Rozenstraat, 2016). Being unemployed also threatens social identity and self-worth (Schöb, 2016).…”

“…The costs are predicted to be more among those who have greater concerns about not finding a job. Numerous studies underline the role of perceived job insecurity as an indirect channel in unemploymentlife satisfaction association (Clark, Knabe and Rätzel, 2010;Winkelmann, 2014;Chadi and Hetschko, 2016), especially for temporarily employed people (Helliwell and Huang, 2014;Schöb, 2016).…”