Unemployment Needs Context: How Societal Differences between Countries Moderate the Loss in Life-Satisfaction for the Unemployed

The notion of voluntary unemployment held by orthodox economic theory could be refuted by happiness research, showing that those unemployed experience a persistent loss in life-satisfaction. However, most current research addressing this question is conducted at the individual level or takes into account only simple economic aggregate indicators, such as unemployment rates or inflation. The effects of unemployment on life-satisfaction however are likely to vary between societies depending on factors beyond the economic realm. This paper demonstrates the need to consider a wider set of country-level characteristics, including economic, demographic and attitudinal indicators, if the relationship between unemployment and life-satisfaction is to be understood adequately. Using data from the World Values Survey multi-level models are computed for up to 40 European and Anglo-Saxon societies. While economic indicators such as GDP per capita and income inequality appear to be relevant, unemployment rates seem to not affect the relationship greatly, contrary to results from several previous studies. Other factors however do, either mitigating the loss in life-satisfaction when becoming unemployed (such as the mean level of the perception of autonomy in a society), or further depressing life-satisfaction (such as the mean emphasis of work in a society, the age-dependency ratio or the proportion of women in the labour force). Possible explanations are discussed and suggestions for improved further research made.