Unemployment significantly reduces life satisfaction. A new job usually makes up for this loss in life satisfaction; however, often it does not fully recover as for instance wages and job security can be lower than they were before unemployment. This effect is known as unemployment scarring. In the same way that a new job positively affects life satisfaction, so does retirement. As of yet it was unclear, whether in this case unemployment scars were present, meaning that retirees who transitioned from unemployment into retirement are not going to be as content as before their loss of job. This question is addressed in a study by Clemens Hetschko, Andreas Knabe and Ronnie Schöb, which has now been accepted for publication by the international journal Demography. In “Looking Back in Anger? Retirement and Unemployment Scarring” the authors use German panel data to analyze unemployed persons’ transition into retirement and find that involuntary unemployment between the last job and retirement causes a loss in life satisfaction after retirement. The scarring effect goes beyond what can be explained by the income loss. People who influenced or even initiated unemployment, by contrast, show no scarring.
By means of an experiment with students from all over Germany, Clemens Hetschko, Louisa Reumont and Ronnie Schöb show that survey-based welfare indicators may suffer from so-called embedding effects. For this purpose, they use the example of the OECD Better Life Index whose validity is strongly limited due to the results of the experiment. The objective of such a survey-based welfare assessment is to determine the preferences of an individual for a variety of quality of life indicators. In the process, a person is asked to weight, for instance, the importance of labour earnings relative to leisure. The experiment shows that the way in which the indicators are embedded in dimensions (i.e. labour earnings is part of employment as one area of life) strongly influences individual’s valuation of the indicators. Thus, depending on how the survey is designed, an indicator can receive a low weight or a high weight in the welfare function. The weight, however, which reflects the citizens’ true appreciation remains completely unclear.
The analysis has now been accepted for publication by the Journal of the Royal Statistical Society, Series A.
Together with Marco Caliendo, Alexandra Fedorets, Carsten Schröder and Linda Wittbrodt, Malte Preuß investigates short-run effects of the German minimum wage reform of 2015. In "The Short-Run Employment Effects of the German Minimum Wage Reform" the authors find only moderate negative employment effects that are mainly driven by declines in marignal employment. For the time being, Labor market adjustments and non-compliance to the new regulations counteracted the large negative ex-ante predictions of up to 900.000 lost.
In another publication our researchers Juliane Hennecke and Malte Preuß investigate the relationship between unemployment and individual locus of control. In "Biased by Success and Failure: How Unemployment Shapes Locus of Control" it becomes apparent that a distinction between short- and long-run effects is appropriate. While the job loss itself does not have any long-run effects, unemployment decreases locus of control temporarily. Such negative effects vanish with the end of the unemployment spell. This finding adds to the existing literature by emphasizing the importance of short-term effects in the unbiased estimation without measurement error.
Professor Schöb will focus on his research in the upcomming summer term 2018. During this time all office hours will be suspended. In case of urgency please contact the other employees at our chair.
The Swiss Journal of Business Research and Practice publishes a new article by Clemens Hetschko and Prof Schöb. In "Modes of Employment and Identity" the two economists review existing literature on the economics of happiness with respect to one of the most important areas of life: work. In particular, they document how different modes of employment, such as unemployment, self-employment or part-time employment affect subjective well-being. In contrast to traditional management research, they mostly rely on studies that use large-scale panel data and measures of happiness other than job satisfaction. This allows them to reveal the important part identity seems to play in the life of workers.
In a recently published interview, Clemens Hetschko talks about the consequences of working conditions, job termination and unemployment on subjective well-being. You can find an online version of the article here (in German). The interview accompanies an article by Silke Rautenberg, entitled „Wer ohne Jobzusage kündigt, riskiert viel“ (in German).
The study „The Magic of the New - How Job Changes Affect Job Satisfaction“ will be published in the Journal of Economics & Management Strategy. Using data from the German Socio-Economic Panel (SOEP), Clemens Hetschko and Adrian Chadi show how voluntary and involuntary job changes affect job satisfaction. It is the first study that extensively analyzes the ‘Honeymoon-Hangover-Effect’ after resignations in a representative sample of employees, while it also shows that unintended job changes neither improve nor worsen employee well-being.