Elevator pitch
Many studies document a large negative effect of unemployment on happiness. Recent research has looked into factors related to impacts on happiness, such as adaptation, social work norms, social capital, religious beliefs, and psychological resources. Getting unemployed people back to work can do more for their happiness than compensating them for doing nothing. But not all unemployed people are equally unhappy. Understanding the differences holds the key to designing effective policies, for helping the unemployed back into work, and for more evenly distributing the burden of unemployment resulting from economic restructuring.
Key findings
Pros
Getting the unemployed back to work does more for their happiness than compensating them.
Because not all people who are unemployed are equally unhappy, good policies should identify and target those who are most unhappy.
Unemployment can deplete mental resources, leading to bad decision making.
Often, the most unhappy unemployed are the least effective in their job search strategies; properly designed support programs can help.
There is no evidence that unemployed workers become less unhappy over time, so support policies should target unemployed persons regardless of the duration of their unemployment.
Cons
A more generous unemployment insurance system does not really improve the situation of the unemployed, as the income replacement has only a minor effect on happiness.
Re-employment policies may fail if onerous application procedures or undue emphasis on discipline exceeds the psychological resources of people already burdened by their unemployment.
There is little scope for affecting social norms, a key determinant of the nonpecuniary cost of unemployment: Unemployment hurts more where work norms are strong, for example due to low aggregate unemployment rates or strong Protestant values.
