The scarring effect of unemployment on psychological well-being across Europe

Abstract

Past unemployment may have a pervasive psychological impact that occurs across nations. We investigate the association between unemployment events across working life and subsequent psychological well-being across 14 European countries. Additionally, we consider the influence of between-country differences in labour market institutions and conditions on the cross-country well-being effects of unemployment. Data detailing life-long employment trajectories and contemporary life conditions are drawn from the Survey of Health, Ageing and Retirement in Europe. The well-being impact of unemployment is modeled using linear, multi-level specifications. Each six-month spell of past unemployment is found to predict reduced quality of life and life satisfaction after the age of 50, having adjusted for a broad range of individual and country-specific covariates. In contrast, the impact of past unemployment on depression is explained by individual demographic factors. We identify the first comparative long-term evidence that unemployment welfare scarring may be a broad, international phenomenon.