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Gary Burtless | The Psychological Toll of High Unemployment

Unemployment and the burden it imposes are very unequally distributed across the population. Young workers, employees in cyclically sensitive industries like construction and manufacturing, and members of historically disadvantaged minorities are more likely to suffer layoffs than other workers. The labor income of most unemployed workers falls to zero, and only part of it is replaced by unemployment compensation and other social benefits. Workers who lose their jobs after short spells of employment or who become unemployed after leaving school or rejoining the labor force seldom qualify for any unemployment benefits at all.

In many respects, U.S. public policy was unusually generous to the unemployed during the recent downturn. Compared with earlier post-war recessions, laid off Americans were eligible to receive unemployment compensation for an exceptionally long time-up to 99 weeks in some states with high unemployment rates. Even with these improvements, however, unemployment benefits remain less generous than they are in other rich industrialized countries. Laid off workers, especially those who suffer long spells of joblessness, receive less income protection in the United States than they do in most of Western Europe, for example.

The psychological toll of unemployment-and of long-term unemployment in particular-is known to be high. Surveys in many industrialized countries show that being unemployed reduces happiness. This finding is hardly surprising. What is more interesting is that the drop in happiness that accompanies unemployment is greater than the change in happiness that can be explained by the drop in income that accompanies job loss. It is widely known that, in a cross-section of people in the same country, differences in income help account for differences in individual happiness. Not surprisingly, people with higher income tend to be happier than people who have less income. Even accounting for the effects of income differences, however, people who describe themselves as unemployed are considerably less happy than the employed.


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