Social Indicators Research

, Volume 128, Issue 3, pp 1147–1169 | Cite as

Subjective Well-Being and the Welfare State: Giving a Fish or Teaching to Fish?

  • Alexander JakubowEmail author


To what extent can social policies influence how individuals experience spells of unemployment? Conventional hypotheses posit that more generous unemployment insurance schemes might increase the subjective well-being of the unemployed, but the empirical literature fails to convincingly confirm (or reject) this proposition. This paper contends that a theoretical preoccupation with the overall generosity of social policies obscures more than it reveals about the mechanisms through which the state can shape how individuals experience spells of unemployment. Social support regimes for the unemployed typically include some combination of active and passive labor market measures. Passive measures provide recipients with various forms of income support during unemployment spells, while active measures help individuals find new and better jobs by improving their overall employability. Several factors—the decreasing marginal utility of income, hedonic adaptation to material conditions, and the substantial non-pecuniary costs associated with unemployment—suggest that investments in active labor market measures will yield relatively greater gains in subjective well-being among the unemployed. These intuitions are confirmed in an analysis of data from three rounds of the European Social Survey (2002–2007) using a combination of fixed-effects and random-effects modeling techniques. While the overall generosity of public expenditures on labor market policy exerts no significant effect on the life satisfaction of the unemployed, the analysis supports the notion that active labor market measures are more effective in promoting life satisfaction among the unemployed than passive measures.


Welfare Labor market policy Unemployment Subjective well-being Life satisfaction 



The author would like to thank Anonymous and two anonymous reviewers for insightful comments and suggested revisions on previous versions of this paper.


  1. Allan, J. P., & Scruggs, L. (2004). Political partisanship and welfare state reform in advanced industrial societies. American Journal of Political Science, 48(3), 496–512.CrossRefGoogle Scholar
  2. Alvarez-Diaz, A., Gonzalez, L., & Radcliff, B. (2010). The politics of happiness: On the political determinants of quality of life in the American states. The Journal of Politics, 72(03), 894–905.CrossRefGoogle Scholar
  3. Andrews, F., & Withey, S. (1976). Social indicators of well-being: Americans’ perceptions of life quality. New York: Plenum.CrossRefGoogle Scholar
  4. Bambra, C. (2006). Research note: Decommodification and the worlds of welfare revisited. Journal of European Social Policy, 16(1), 73–80.CrossRefGoogle Scholar
  5. Bjornskov, C. (2006). The multiple facets of social capital. European Journal of Political Economy, 22(1), 22–40.CrossRefGoogle Scholar
  6. Bjornskov, C., Dreher, A., & Fischer, J. A. V. (2007). The bigger the better? Evidence of the effect of government size on life satisfaction around the world. Public Choice, 130(3–4), 267–292.CrossRefGoogle Scholar
  7. Bjornskov, C., Dreher, A., & Fischer, J. A. (2008). On decentralization and life satisfaction. Economics Letters, 99(1), 147–151.CrossRefGoogle Scholar
  8. Bjornskov, C., Dreher, A., & Fischer, J. A. V. (2010). Formal institutions and subjective well-being: Revisiting the cross-country evidence. European Journal of Political Economy, 26(4), 419–430.CrossRefGoogle Scholar
  9. Brickman, P., Coates, D., & Janoff-Bulman, R. (1978). Lottery winners and accident victims: Is happiness relative? Journal of Personality and Social Psychology, 36(8), 917–927.CrossRefGoogle Scholar
  10. Campbell, A., Converse, P., & Rodgers, W. (1976). The quality of American life: Perceptions, evaluations, and satisfactions. New York: Russell Sage Foundation.Google Scholar
  11. Clark, A. E., & Georgellis, Y. (2012). Back to baseline in Britain: Adaptation in the British household panel survey. Economica. doi: 10.1111/ecca.12007 Google Scholar
  12. Clark, A. E., & Oswald, A. J. (1994). Unhappiness and unemployment. The Economic Journal, 104(424), 648–659.CrossRefGoogle Scholar
  13. Clark, A. E., Diener, E., Georgellis, Y., & Lucas, R. E. (2008). Lags and leads in life satisfaction: A test of the baseline hypothesis. The Economic Journal, 118(529), F222–F243.CrossRefGoogle Scholar
  14. Commission on Growth and Development. (2008). The growth report: Strategies for sustained growth and inclusive development. Washington, DC: World Bank.Google Scholar
  15. Di Tella, R., MacCulloch, R. J., & Oswald, A. J. (2003). The macroeconomics of happiness. Review of Economics and Statistics, 85(4), 809–827.CrossRefGoogle Scholar
  16. Diener, E., & Diener, M. (1995). Cross-cultural correlates of life satisfaction and self-esteem. Journal of Personality and Social Psychology, 68(4), 653–663.CrossRefGoogle Scholar
  17. Diener, E., & Lucas, R. E. (2000). Explaining differences in societal levels of happiness: Relative standards, need fulfillment, culture, and evaluation theory. Journal of Happiness Studies, 1(1), 41–78.CrossRefGoogle Scholar
  18. Diener, E., Diener, M., & Diener, C. (1995). Factors predicting the subjective well-being of nations. Journal of Personality and Social Psychology, 69(5), 851–864.CrossRefGoogle Scholar
  19. Dolan, P., Peasgood, T., & White, M. (2008). Do we really know what makes us happy? A review of the economic literature on the factors associated with subjective well-beingeing. Journal of Economic Psychology, 29(1), 94–122.CrossRefGoogle Scholar
  20. Dorn, D., Fischer, J. A., Kirchgässner, G., & Sousa-Poza, A. (2006). Is it culture or democracy? The impact of democracy and culture on happiness. Social Indicators Research, 82(3), 505–526.CrossRefGoogle Scholar
  21. Dorn, D., Fischer, J. A., Kirchgässner, G., & Sousa-Poza, A. (2008). Direct democracy and life satisfaction revisited: New evidence for switzerland. Journal of Happiness Studies, 9(2), 227–255.CrossRefGoogle Scholar
  22. Easterlin, R. (1974). Does economic growth improve the human lot? Some empirical evidence. In P. David & M. Reder (Eds.), Nations and households in economic growth: Essays in honour of Moses Abramowitz (pp. 89–125). New York: Academic Press.CrossRefGoogle Scholar
  23. Easterlin, R. A. (1995). Will raising the incomes of all increase the happiness of all? Journal of Economic Behavior and Organization, 27(1), 35–47.CrossRefGoogle Scholar
  24. Easterlin, R. A. (2001). Income and happiness: Towards a united theory. The Economic Journal, 111, 465–484.CrossRefGoogle Scholar
  25. Easterlin, R. A. (2003). Explaining happiness. Proceedings of the National Academy of Sciences of the United States of America, 100, 11176–11183.CrossRefGoogle Scholar
  26. Easterlin, R. A. (2005). Feeding the illusion of growth and happiness: A reply to Hagerty and Veenhoven. Social Indicators Research, 74(3), 429–443.CrossRefGoogle Scholar
  27. Esping-Andersen, G. (1990). The three worlds of welfare capitalism. Princeton: Princeton University Press.Google Scholar
  28. Eurostat. (2011). Esspros manual: The European system of integrated social PROtection statistics. Tech. rep., Eurostat.Google Scholar
  29. Ferrer-i Carbonell, A., & Frijters, P. (2004). How important is methodology for the estimates of the determinants of happiness? The Economic Journal, 114(497), 641–659.CrossRefGoogle Scholar
  30. Flavin, P., Pacek, A. C., & Radcliff, B. (2009). Labor unions and life satisfaction: Evidence from new data. Social Indicators Research, 98(3), 435–449.CrossRefGoogle Scholar
  31. Flavin, P., Pacek, A., & Radcliff, B. (2011). State intervention and subjective well-being in advanced industrial democracies. Politics and Policy, 39(2), 251–269.CrossRefGoogle Scholar
  32. Frank, R. (1997). The frame of reference as a public good. The Economic Journal, 107(445), 1832–1847.CrossRefGoogle Scholar
  33. Frey, B. S., & Stutzer, A. (2010). Happiness and public choice. Public Choice, 144(3–4), 557–573.CrossRefGoogle Scholar
  34. Freyer, D. (1986). Employment deprivation and personal agency during unemployment: A critical discussion of Jahoda’s explanation of the psychological effects of unemployment. Social Behaviour, 1(1), 3–23.Google Scholar
  35. Helliwell, J., & Huang, H. (2008). How’s your government? International evidence linking good government and well-being. British Journal of Political Science, 38(4), 595–619.CrossRefGoogle Scholar
  36. Holmberg, S., Rothstein, B., & Nasiritousi, N. (2009). Quality of government: What you get. Annual Review of Political Science, 12(1), 135–161.CrossRefGoogle Scholar
  37. Jahoda, M. (1982). Employment and unemployment: A social-psychological analysis. Cambridge: Cambridge University Press.Google Scholar
  38. Korpi, T. (1997). Is utility related to employment status? Employment, unemployment, labor market policies and subjective well-being among Swedish youth. Labour Economics, 4(2), 125–147.CrossRefGoogle Scholar
  39. Layard, R. (2006). Happiness and public policy: A challenge to the profession. The Economic Journal, 116(510), C24–C33.CrossRefGoogle Scholar
  40. Lucas, R. E. (2007). Adaptation and the set-point model of subjective well-being: Does happiness change after major life events? Current Directions in Psychological Science, 16(2), 75–79.CrossRefGoogle Scholar
  41. Michalos, A. (1985). Multiple discrepancies theory (MDT). Social Indicators Research, 16(4), 347–413.CrossRefGoogle Scholar
  42. Nordenmark, M. (1999). Employment commitment and psychological well-being among unemployed men and women. Acta Sociologica, 42(2), 135–146.CrossRefGoogle Scholar
  43. Nordenmark, M., & Strand, M. (1999). Towards a sociological understanding of mental well-being among the unemployed: The role of economic and psychosocial factors. Sociology, 33(3), 577–597.Google Scholar
  44. Nordenmark, M., Strandh, M., & Layte, R. (2006). The impact of unemployment benefit system on the mental well-being of the unemployed in Sweden, Ireland and Great Britain. European Societies, 8(1), 83–110.CrossRefGoogle Scholar
  45. Ott, J. C. (2010). Greater happiness for a greater number: Some non-controversial options for governments. Journal of Happiness Studies, 11(5), 631–647.CrossRefGoogle Scholar
  46. Ott, J. C. (2011). Government and happiness in 130 nations: Good governance fosters higher level and more equality of happiness. Social Indicators Research, 102(1), 3–22.CrossRefGoogle Scholar
  47. Ouweneel, P. (2002). Social security and well-being of the unemployed in 42 nations. Journal of Happiness Studies, 3(2), 167–192.CrossRefGoogle Scholar
  48. Pacek, A., & Radcliff, B. (2008a). Assessing the welfare state: The politics of happiness. Perspectives on Politics, 6(2), 267–277.CrossRefGoogle Scholar
  49. Pacek, A. C., & Radcliff, B. (2008b). Welfare policy and subjective well-being across nations: An individual-level assessment. Social Indicators Research, 89(1), 179–191.CrossRefGoogle Scholar
  50. Rabe-Hesketh, S., & Skrondal, A. (2008). Multilevel and longitudinal modeling using Stata (2nd ed.). College Station, TX: Stata Press.Google Scholar
  51. Radcliff, B. (2001). Politics, markets, and life satisfaction: The political economy of human hapiness. The American Political Science Review, 95(4), 939–952.Google Scholar
  52. Samanni, M., & Holmberg, S. (2010). Quality of government makes people happy. QoG Working Paper Series 1.Google Scholar
  53. Sjöberg, O. (2010). Social insurance as a collective resource: Unemployment benefits, job insecurity and subjective well-being in a comparative perspective. Social Forces, 88(3), 1281–1304.CrossRefGoogle Scholar
  54. Skrondal, A., & Rabe-Hesketh, S. (2004). Generalized latent variable modeling: Multilevel, longitudinal, and structural equation models. Boca Raton, FL: Chapman & Hall/CRC.CrossRefGoogle Scholar
  55. Steenbergen, M., & Jones, B. (2002). Modeling multilevel data structures. American Journal of Political Science, 46(1), 218–237.CrossRefGoogle Scholar
  56. Stevenson, B., & Wolfers, J. (2008). Economic growth and subjective well-being: Reassessing the Easterlin paradox. Tech. Rep. 14282, National Bureau of Economic Research.Google Scholar
  57. Stutzer, A., & Lalive, R. (2004). The role of social work norms in job searching and subjective well-being. Journal of the European Economic Association, 2(4), 696–719.CrossRefGoogle Scholar
  58. Triandis, H. (1989). The self and social behavior in differing cultural contexts. Psychological Review, 96(3), 506–520.CrossRefGoogle Scholar
  59. Veenhoven, R. (1996). Developments in satisfaction-research. Social Indicators Research, 37(1), 1–46.CrossRefGoogle Scholar
  60. Veenhoven, R. (1997). Advances in understanding happiness. Revue québécoise de psychologie, 18(2), 29–74.Google Scholar
  61. Veenhoven, R., & Hagerty, M. (2006). Rising happiness in nations 1946–2004: A reply to Easterlin. Social Indicators Research, 79(3), 421–436.CrossRefGoogle Scholar
  62. Whiteley, P., Clarke, H. D., Sanders, D., & Stewart, M. C. (2010). Government performance and life satisfaction in contemporary Britain. The Journal of Politics, 72(3), 733–746.CrossRefGoogle Scholar
  63. Wilkinson, R., & Pickett, K. (2009). The spirit level: Why greater equality makes societies stronger. New York: Bloomsbury Press.Google Scholar
  64. Winkelmann, L., & Winkelmann, R. (1998). Why are the unemployed so unhappy? Evidence from panel data. Economica, 65(257), 1–15.CrossRefGoogle Scholar
  65. Young, C. (2012). Losing a job: The nonpecuniary cost of unemployment in the United States. Social Forces, 91(2), 609–634.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2015

Authors and Affiliations

  1. 1.Department of GovernmentNew Mexico State UniversityLas CrucesUSA

Personalised recommendations