Unemployment, economic instability, and well-being

Many studies document a large negative effect of unemployment on happiness. The nonpecuniary cost of unemployment exceeds the pecuniary cost, and not conforming to the social work norm is one of the main drivers of loss of life satisfaction. If a government wishes to ensure national well-being, as well as greater productivity, it should put full employment center-stage among the goals of its economic policy.

Listen to talks on this topic by Alex Bryson and Jan-Emmanuel De Neve from January 23, 2018.

  • The impact of monitoring and sanctioning on unemployment exit and job-finding rates Updated

    Job search monitoring and benefit sanctions generally reduce unemployment duration and boost entry to employment in the short term

    Duncan McVicar, June 2020
    Unemployment benefits reduce incentives to search for a job. Policymakers have responded to this behavior by setting minimum job search requirements, by monitoring to check that unemployment benefit recipients are engaged in the appropriate level of job search activity, and by imposing sanctions for infractions. Empirical studies consistently show that job search monitoring and benefit sanctions reduce unemployment duration and increase job entry in the short term. However, there is some evidence that longer-term effects of benefit sanctions may be negative.
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  • Men without work: A global well-being and ill-being comparison

    The number of prime-age males outside the labor force is increasing worldwide, with worrying results

    Carol GrahamSergio Pinto, October 2019
    The global economy is full of progress paradoxes. Improvements in technology, reducing poverty, and increasing life expectancy coexist with persistent poverty in the poorest countries and increasing inequality and unhappiness in many wealthy ones. A key driver of the latter is the decline in the status and wages of low-skilled labor, with an increasing percentage of prime-aged men (and to a lesser extent women) simply dropping out of the labor force. The trend is starkest in the US, though frustration in this same cohort is also prevalent in Europe, and it is reflected in voting patterns in both contexts.
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  • Compensating displaced workers

    Uncoordinated unemployment insurance and severance pay do a poor job of insuring against losses resulting from job displacement

    Donald O. Parsons, September 2018
    Job displacement poses a serious earnings threat to long-tenured workers through unemployment spells and lower re-employment wages. The prevailing method of insuring job displacement losses involves an uncoordinated combination of unemployment insurance and severance pay. Less developed countries often rely exclusively on public mandating of employer severance pay due to the administrative complexity of unemployment insurance systems. If both options are operational, systematic integration of the two is important, although perhaps not possible if severance pay is voluntarily provided.
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  • Measuring employment and unemployment

    Should statistical criteria for measuring employment and unemployment be re-examined?

    Measuring employment and unemployment is essential for economic policy. Internationally agreed measures (e.g. headcount employment and unemployment rates based on standard definitions) enhance comparability across time and space, but changes in real labor markets and policy agendas challenge these traditional conventions. Boundaries between different labor market states are blurred, complicating identification. Individual experiences in each state may vary considerably, highlighting the importance of how each employed or unemployed person is weighted in statistical indices.
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  • How should job displacement wage losses be insured?

    Wage losses upon re-employment can seriously harm long-tenured displaced workers if they are not properly insured

    Donald O. Parsons, June 2018
    Job displacement represents a serious earnings risk to long-tenured workers through lower re-employment wages, and these losses may persist for many years. Moreover, this risk is often poorly insured, although not for a lack of policy interest. To reduce this risk, most countries mandate scheduled wage insurance (severance pay), and it is voluntarily provided in others. Actual-loss wage insurance is uncommon, although perceived difficulties may be overplayed. Both approaches offer the hope of greater consumption smoothing, with actual-loss plans carrying greater promise.
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  • Job search monitoring and assistance for the unemployed

    Can job search requirements and job search assistance help the unemployed find better jobs faster?

    Ioana E. Marinescu, August 2017
    In many countries, reducing unemployment is among the most important policy goals. In this context, monitoring job search by the unemployed and providing job search assistance can play a crucial role. However, more and more stringent monitoring and sanctions are not a panacea. Policymakers must consider possible downsides, such as unemployed people accepting less stable and lower-paying jobs. Tying “moderate” monitoring to job search assistance may be the essential ingredient to make this approach successful.
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