Re-employment and Life Satisfaction
Table 4 illustrates the results obtained from the conditional logit estimator using the standard set of control variables. The strong and positive correlation between finding a job and life satisfaction shown in Table 3 persists in a multivariate setting, both for the whole sample and when tested separately for men and women.Footnote 16
One concern regarding the reliability of this result could be the underlying sample structure. Since we have pooled across individuals regardless how many times (and years) they have been unemployed between 1990 and 2006, people who are unemployed for several years will enter the sample more than once. This also means that long-term unemployed and people who repeatedly lost their job are overrepresented in our sample. To test whether this particular data structure is likely to influence our results, we re-run all regressions on randomly drawn samples with only one (t
1) sequence per individual. Although the share of the unemployed in t
1 declines from 76% to around 67%, the main results remain remarkable stable as can be seen from Table 4, column 4.Footnote 17
Another related aspect of the relationship between life satisfaction and re-employment is the potential bias due to self-selection into employment. People have heterogeneous preferences regarding employment and those with strong preferences for work are more likely to find and accept a job—even one of low quality. For the same reason, they may gain more from taking any job (i.e. realise and report higher welfare levels) than those with weak preferences for work. Hence, the observed increase in life satisfaction among the re-employed could simply reflect different preferences.
Given the data at hand, we cannot directly control for self-selection and isolate its potential effect. However, we can put forward some empirical evidence suggesting that the effect is unlikely to be very pronounced. If it were, we would expect that those with strong work preferences will be overrepresented among the re-employed who in turn should have been particularly unhappy while being unemployed. As shown in Table 3, this is not the case: at t
0 there is only a small, statistically insignificant difference between ‘movers’ (employed at t
1) and ‘stayers’ (unemployed at t
1). Admittedly, this argument cannot fully rule out any potential selection bias since it is based on a cross-sectional comparison of satisfaction levels, but it indicates that self-selection only seems to play a minor role and higher life satisfaction is largely a causal effect of re-employment.
Regarding other covariates, we find that age has a negative effect, but is only significant among men. Probably due to little variation between years, for some of the standard controls like educational level, being in a stable relationship and whether children live in the household we cannot identify significant effects. On the other hand, higher household net incomes and higher health satisfaction levels have positive effects on life satisfaction, however, the magnitude of the effects are somewhat different for men and women. Overall labor market conditions are proxied by federal unemployment rates and results suggest that higher levels of regional unemployment lower the probability of life satisfaction improvements, especially for men.Footnote 18
The Role of Job Quality
In order to gain a better understanding of the role job quality plays for life satisfaction, we will turn to the results presented in Table 5.Footnote 19 Panel A shows the results when using self-reported job satisfaction levels, earnings and type of contract as an indicator of job quality. Regarding job satisfaction scores, the coefficients for categories low, medium and high are all positive indicating that the probability of being better off increases with the level of job satisfaction, but the effect is insignificant for the lowest category. Hence, those least satisfied with their new position are not likely to be better off than the unemployed. We then test whether certain employment conditions allow us to again identify a group of workers that will not be better off than the unemployed. As can be seen from columns 2–4, we can reject the hypothesis that low wage jobs or temporary employment contracts are associated with lower life satisfaction scores. On the contrary, people employed under these conditions still have significantly better chances of improvements in life satisfaction than the unemployed. Even for the group of workers with temporary low wage jobs (i.e. combining both dimensions) we still find a significant positive effect on life satisfaction. This suggests that other job characteristics, if any, result in low levels of job satisfaction.
Testing for differences among full-time employees reveals that only those in higher wage jobs are significantly better off than those in low wage jobs. For all other sub-samples of workers shown in Panel A the coefficients are not statistically different from each other.
Next, we turn to the measures of job match and occupational prestige (Panel B). People who work in professions which obtained low prestige scores according to the Treiman scale or report low levels of autonomy in occupational actions are still significantly better off than the unemployed (columns 1 and 2). The picture remains much the same when looking at job fit measures, despite the fact that the professional mismatch in our sample seems substantial: More than a third report that they feel overqualified for the new position and around 40% do not find work in the occupation they were trained for. As shown in columns 3 and 4, even these groups of workers are more likely to realize an increase in life satisfaction. Comparing the differences among full-time employees, we observe larger coefficients for the presumably better categories in three cases, however, most of these differences are not statistically significant. Only when comparing jobs with high and low Treiman prestige scores we can detect a significant difference.
Our final approach to operationalizing job quality rests upon a comparison of certain aspects of the current job versus the previous job. Respondents are asked to indicate whether e.g. earnings, kind of activity, workload and career prospects have improved, worsened or are about the same.Footnote 20 Table 5, Panel C, shows the results when testing separately for the relationship between some of these assessments and life satisfaction. As one would expect, improved or similar working conditions are positively correlated with life satisfaction. When people encounter a worse work environment, they are still significantly better off than the unemployed, but significantly less so than respondents with improved working conditions.
Testing for different aspects of the new position separately may not be the appropriate way to identify ‘bad’ jobs. In order to control for a number of relevant criteria simultaneously, we construct an index which combines the information of six variables comparing the current with previous the job. In particular, we will rely on comparative data regarding the kind of activity, earnings, advancement possibilities, workload, working hours regulations and use of professional knowledge (see also Table 2). Applying multiple correspondence analysis allows us to map 58% of the variables’ principal inertia in one dimension. To adequately represent the distribution of the index scores, we rather consider deciles than one continuous variable reflecting the average index value in the empirical analysis. Table 6 presents the results. As indicated by the coefficients obtained for the deciles controls, the index does not have a linear effect on life satisfaction such as that being in a higher decile would correspond to a higher probability of improvements in life satisfaction. Rather, our results suggest a certain threshold effect, since relatively low scores are still associated with higher levels of life satisfaction. Only for the lowest decile, i.e. where the current job is worse than the previous one in many respects, the coefficient remains insignificant, indicating that the positive effect of finding new employment is fully offset by much worse working conditions.
A similar result can be obtained when simply calculating the sum score across all six variables used to construct the index. A sum score of at least 4 will assure that there is no positive significant effect anymore (Table 6, column 2). In other words, if the new position was rated worse in four or more aspects, the positive impact on life satisfaction disappears. However, since only 12% of all jobs in our sample have negative ratings in 4 or more aspects, this result needs to be interpreted with caution.
In a final step, we attempt to identify dimensions for which a joint deterioration will be of particular importance for overall life satisfaction. Combining the ‘worse/less’ outcomes of all six comparison variables yields 15 pairs of job characteristics (e.g. worse kind of activity and less use of professional knowledge). Although the number of jobs sharing any of these negative assessments sometimes falls below 100, we are able to identify combinations of bad job assessments that still have a significant positive effect on life satisfaction. In case of eight combinations, however, the coefficient remains insignificant.Footnote 21 We take this as an indicator of job aspects that are particularly important and, if deteriorating jointly, will equalize the positive effect of being full-time employed. Columns 3 and 4 of Table 6 show the results for two of those combinations.
Job Quality and Medium Term Effects
Closely related to studying determinants of subjective well-being is the question whether or not people adapt to a changed economic or social environment. Also using GSOEP data, Clark et al. (2008) analyze the degree of anticipation and adaptation to six labor market and family events. Controlling for unobserved heterogeneity, they find strong evidence of both lead and lag effects on current levels of life satisfaction suggesting that after some time subjective well-being indicators tend to return to a particular baseline level. Of particular relevance to our study are their results with respect to unemployment. In general, there is only little evidence of adaptation to unemployment within a time span of 5 years and the authors conclude that unemployment has long-lasting effects.
So far, our results have shown that within a year of commencing a new job, the quality of this job matters little for overall life satisfaction. For most of our analysis, people employed under adverse working conditions are still better off than those who remain unemployed. Furthermore, differences in the probability to experiencing higher levels of well-being are often not statistically significant between workers in low quality and higher quality jobs.
To see whether job quality only starts to matter at a later stage, we follow individuals over 2 years and only compare satisfaction levels between t
0 (when everyone was unemployed) and t
2, but use information regarding employment status and, if applicable, job quality at t
1.Footnote 22 Results are shown in Table 7. First, we simply control for the employment effect on life satisfaction. As can be seen from column 1, people who have been employed in both years enjoy higher levels of life satisfaction as do people who eventually found employment in t
2. Those who became unemployed again in t
2 report similar satisfaction levels than the long-time unemployed.
In columns 2–5, the underlying sample consists of people who are either employed at t
1 and t
2 or remain unemployed in all years. Somewhat restricted by data availability, we select four indicators of job quality and sort people according to the number of years they have been employed under unfavorable conditions. As can be seen from Table 7, results from this approach are very similar to those discussed earlier. For people reporting low job satisfaction levels in two consecutive years there is no significant relationship with life satisfaction.Footnote 23 Regarding other indicators of presumably low quality jobs, results suggest that being employed in low wage jobs, feeling overqualified or having only little occupational autonomy for 2 years is not detrimental to life satisfaction. Hence, within a time span of 2 years, we cannot identify any negative effects of working under less favorable conditions that would attenuate or even outweigh the significant positive effect of commencing a full-time job after an unemployment spell.