Advertisement

Demography

, Volume 56, Issue 3, pp 1105–1129 | Cite as

Looking Back in Anger? Retirement and Unemployment Scarring

  • Clemens HetschkoEmail author
  • Andreas Knabe
  • Ronnie Schöb
Article

Abstract

Unemployment affects future working conditions and job security negatively, thus reducing life satisfaction after reemployment. These employment-related scars of unemployment should not matter anymore when a person has retired. Using German panel data, we analyze unemployed persons’ transition into retirement to test whether unemployment leaves scars beyond working life and thus for reasons that are not employment-related. We find that involuntary unemployment between the last job and retirement causes a loss in life satisfaction after retirement. People who influenced or even initiated unemployment, by contrast, show no scarring. The scarring effect goes beyond what can be explained by the income loss originating from reduced pensions. It shows up independently of whether the unemployment spell directly before retirement was the only experience of unemployment in a person’s career, or whether she had also experienced unemployment at earlier times. We do not find evidence that early retirement or involuntary retirement are the reasons why formerly unemployed retirees display unemployment scarring.

Keywords

Retirement Life satisfaction Unemployment scarring Involuntary unemployment 

Notes

Acknowledgments

We thank the Editors and two anonymous referees for their helpful suggestions, and Tom Günther for excellent research assistance. Moreover, we are grateful for comments on a previous version to C. Katharina Spieß; Reto Odermatt; and participants of the SOEP seminar at DIW Berlin (2013), the IAAEU seminar at the University of Trier (2013), the annual conference of the German Economic Association, Hamburg (2014), and the IAB conference Labor Market Prospects of Older Workers, Nuremberg (2014). Clemens Hetschko and Ronnie Schöb acknowledge financial support by the German Science Foundation (DFG) through Project SCHO 1270/5-1.

Supplementary material

13524_2019_778_MOESM1_ESM.docx (132 kb)
ESM 1 (DOCX 132 kb)

References

  1. Arulampalam, W., Gregg, P., & Gregory, M. (2001). Unemployment scarring. Economic Journal, 111, F577–F584.CrossRefGoogle Scholar
  2. Bell, D. N. F., & Blanchflower, D. G. (2011). Young people and the Great Recession. Oxford Review of Economic Policy, 27, 241–267.CrossRefGoogle Scholar
  3. Bender, K. A. (2012). An analysis of well-being in retirement: The role of pensions, health, and “voluntariness” of retirement. Journal of Socio-Economics, 41, 424–433.CrossRefGoogle Scholar
  4. Blanchflower, D. G., & Oswald, A. J. (2004). Well-being over time in Britain and the USA. Journal of Public Economics, 88, 1359–1386.CrossRefGoogle Scholar
  5. Bonsang, E., & Klein, T. J. (2012). Retirement and subjective well-being. Journal of Economic Behavior & Organization, 83, 311–329.CrossRefGoogle Scholar
  6. Börsch-Supan, A., & Schnabel, R. (1998). Social security and retirement in Germany. In J. Gruber & D. Wise (Eds.), Social security and retirement around the world (pp. 135–180). Chicago, IL: University of Chicago Press.Google Scholar
  7. Brand, J. (2006). The effects of job displacement on job quality: Findings from the Wisconsin Longitudinal Study. Research in Social Stratification and Mobility, 24, 275–298.CrossRefGoogle Scholar
  8. Calvo, E., Haverstick, K., & Sass, S. A. (2009). Gradual retirement, sense of control, and retirees’ happiness. Research on Aging, 31, 112–135.CrossRefGoogle Scholar
  9. Clark, A. E. (2003). Unemployment as a social norm: Psychological evidence from panel data. Journal of Labor Economics, 21, 323–351.CrossRefGoogle Scholar
  10. Clark, A. E., Diener, E., Georgellis, Y., & Lucas, R. E. (2008). Lags and leads in life satisfaction: A test of the baseline hypothesis. Economic Journal, 118, F222–F243.CrossRefGoogle Scholar
  11. Clark, A. E., & Georgellis, Y. (2013). Back to baseline in Britain: Adaptation in the British Household Panel Survey. Economica, 80, 496–512.CrossRefGoogle Scholar
  12. Clark, A. E., Georgellis, Y., & Sanfey, P. (2001). Scarring: The psychological impact of past unemployment. Economica, 68, 221–241.CrossRefGoogle Scholar
  13. Cobb-Clark, D. A., & Schurer, S. (2012). The stability of big-five personality traits. Economics Letters, 115, 11–15.CrossRefGoogle Scholar
  14. Daly, M., & Delaney, L. (2013). The scarring effect of unemployment throughout adulthood on psychological distress at age 50: Estimates controlling for early adulthood distress and childhood psychological factors. Social Science & Medicine, 80, 19–23.CrossRefGoogle Scholar
  15. Destatis. (2017). 11% der 65- bis 74-Jährigen sind erwerbstätig [11% of 65–74 year-olds are employed] [Press Release No. 240/17]. Retrieved from https://www.destatis.de/DE/PresseService/Presse/Pressemitteilungen/2017/07/PD17_240_122.html
  16. Dieckhoff, M. (2011). The effect of unemployment on subsequent job quality in Europe: A comparative study of four countries. Acta Sociologica, 54, 233–249.CrossRefGoogle Scholar
  17. Eliason, M., & Storrie, D. (2006). Lasting or latent scars? Swedish evidence on the long-term effects of job displacement. Journal of Labor Economics, 24, 831–856.CrossRefGoogle Scholar
  18. Frijters, P., Johnston, D. W., & Shields, M. A. (2014). Does childhood predict adult life satisfaction? Evidence from British Cohort Surveys. Economic Journal, 124, F688–F719.CrossRefGoogle Scholar
  19. Hainmueller, J., & Xu, Y. (2013). Ebalance: A Stata package for entropy balancing. Journal of Statistical Software, 54(7), 1–18.CrossRefGoogle Scholar
  20. Henning, G., Lindwall, M., & Johansson, B. (2016). Continuity in well-being in the transition to retirement. GeroPsych, 59, 225–237.CrossRefGoogle Scholar
  21. Hetschko, C., Knabe, A., & Schöb, R. (2014). Changing identity: Retiring from unemployment. Economic Journal, 124, 149–166.CrossRefGoogle Scholar
  22. Hijzen, A., Upward, R., & Wright, P. W. (2010). The income losses of displaced workers. Journal of Human Resources, 45, 243–269.CrossRefGoogle Scholar
  23. Kassenboehmer, S., & Haisken-DeNew, J. (2009). You’re fired! The causal negative effect of entry unemployment on life satisfaction. Economic Journal, 119, 448–462.CrossRefGoogle Scholar
  24. Knabe, A., & Rätzel, S. (2011). Scarring or scaring? The psychological impact of past unemployment and future unemployment risk. Economica, 78, 283–293.CrossRefGoogle Scholar
  25. Kroft, K., Lange, F., & Notowidigdo, M. J. (2013). Duration dependence and labor market conditions: Evidence from a field experiment. Quarterly Journal of Economics, 128, 1123–1167.CrossRefGoogle Scholar
  26. Lange, T. (2013). Scarred from the past or afraid of the future? Unemployment and job satisfaction across European labour markets. International Journal of Human Resource Management, 24, 1096–1112.CrossRefGoogle Scholar
  27. Layard, R., Clark, A. E., Cornaglia, F., Powdthavee, N., & Vernoit, J. (2014). What predicts a successful life? A life-course model of well-being. Economic Journal, 124, F720–F738.CrossRefGoogle Scholar
  28. Lüchinger, S., Meier, S., & Stutzer, A. (2010). Why does unemployment hurt the employed? Evidence from the life satisfaction gap between the public and the private sector. Journal of Human Resources, 45, 998–1045.Google Scholar
  29. Luhmann, M., & Eid, M. (2009). Does it really feel the same? Changes in life satisfaction following repeated life events. Journal of Personality and Social Psychology, 97, 363–381.CrossRefGoogle Scholar
  30. Luhmann, M., Hofmann, W., Eid, M., & Lucas, R. E. (2012). Subjective well-being and adaptation to life events: A meta-analysis. Journal of Personality and Social Psychology, 102, 592–615.Google Scholar
  31. Lühning, R. (2006). Entwicklung des Leistungsrechts der gesetzlichen Rentenversicherung in der Bundesrepublik Deutschland seit der großen Rentenreform von 1957 (1957–2004) [Development of the benefit legislation of the statutory pension insurance scheme in the Federal Republic of Germany since the Great Pension Reform of 1957 (1957–2004)]. Berlin, Germany: Logos.Google Scholar
  32. Marcus, J. (2013). The effect of unemployment on the mental health of spouses – Evidence from plant closures in Germany. Journal of Health Economics, 32, 546–558.CrossRefGoogle Scholar
  33. Nikolova, M., & Graham, C. (2014). Employment, late-life work, retirement, and well-being in Europe and the United States. IZA Journal of European Labor Studies, 3(5).  https://doi.org/10.1186/2193-9012-3-5
  34. Ponomarenko, V., Leist, A., & Chauvel, L. (2019). Increases in well-being in the transition to retirement for the unemployed: Catching up with formerly employed persons. Ageing and Society, 39, 254–276.CrossRefGoogle Scholar
  35. Preuß, M., & Hennecke, J. (2018). Biased by success and failure: How unemployment shapes locus of control. Labour Economics, 53, 63–74.CrossRefGoogle Scholar
  36. Qari, S. (2014). Marriage, adaptation and happiness: Are there long-lasting gains to marriage? Journal of Behavioral and Experimental Economics, 50, 29–39.CrossRefGoogle Scholar
  37. Richter, D., Rohrer, J., Metzing, M., Nestler, W., Weinhardt, M., & Schupp, J. (2017). SOEP scales manual [Updated for SOEP-Core v32. 1] (SOEP Survey Papers No. 423, Series C). Berlin, Germany: DIW Berlin.Google Scholar
  38. Schöb, R. (2013). Unemployment and identity. CESifo Economic Studies, 59, 149–180.CrossRefGoogle Scholar
  39. Schwerdt, G., Ichino, A., Ruf, O., Winter-Ebmer, R., & Zweimüller, J. (2010). Does the color of the collar matter? Employment and earnings after plant closure. Economics Letters, 108, 137–140.CrossRefGoogle Scholar
  40. SGB VI. Sozialgesetzbuch. Sechstes Buch: Gesetzliche Rentenversicherung [Social code—Book VI: Statutory pension insurance] [April 28, 2011 version].Google Scholar
  41. Stanton, C. T., & Thomas, C. (2016). Landing the first job: The value of intermediaries in online hiring. Review of Economic Studies, 83, 810–854.CrossRefGoogle Scholar
  42. 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, 696–719.CrossRefGoogle Scholar
  43. Van Hoorn, A., & Maseland, R. (2013). Does a Protestant work ethic exist? Evidence from the well-being effect of unemployment. Journal of Economic Behavior & Organization, 91, 1–12.CrossRefGoogle Scholar
  44. Wagner, G. G., Frick, J. R., & Schupp, J. (2007). The German Socio-Economic Panel Study (SOEP)—Scope, evolution and enhancements. Schmollers Jahrbuch, 127, 139–169.Google Scholar
  45. Wetzel, M., Huxhold, O., & Tesch-Römer, C. (2016). Transition into retirement affects life satisfaction: Short-and long-term development depends on last labor market status and education. Social Indicators Research, 125, 991–1009.CrossRefGoogle Scholar
  46. Winkelmann, L., & Winkelmann, R. (1998). Why are the unemployed so unhappy? Evidence from panel data. Economica, 65, 1–15.CrossRefGoogle Scholar
  47. Young, C. (2012). Losing a job: The nonpecuniary cost of unemployment in the United States. Social Forces, 91, 609–634.CrossRefGoogle Scholar

Copyright information

© Population Association of America 2019

Authors and Affiliations

  • Clemens Hetschko
    • 1
    • 2
    • 3
    Email author
  • Andreas Knabe
    • 3
    • 4
  • Ronnie Schöb
    • 1
    • 3
  1. 1.Freie Universität BerlinBerlinGermany
  2. 2.Institute for Employment Research (IAB)NurembergGermany
  3. 3.CESifoMunichGermany
  4. 4.Otto von Guericke University MagdeburgMagdeburgGermany

Personalised recommendations