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Well-Being, Decision-Making and Unemployment in Europe

Final Report Summary - WEDEPLOY (Well-Being, Decision-Making and Unemployment in Europe)

The aim of this project is to develop and test a model of unemployment, taking into account interactions between unemployment, well-being and inter-temporal job-related decision-making such as job-search and take-up of and response to job-related training. The project focuses in particular on youth unemployment. Youth unemployment rates across Europe are currently at alarmingly high rates and traditional employment activation models are having very little success in a context of sluggish labour demand. Understanding how the current rates of unemployment will lead to long-term unemployment and scarring among young people in Europe and potential responses is a key task for research and policy. The project uses existing secondary datasets, such as the UK National Cohort studies to examine the linkages between well-being, unemployment and decision-making from the disciplinary perspectives of economics, epidemiology and psychology.

To date, three key papers have been fully accepted and appeared in top scientific journals. The first paper, published in Social Science and Medicine, "The scarring effect of unemployment throughout adulthood on psychological distress at age 50: Estimates controlling for early adulthood distress and childhood​ psychological factors" models the extent to which early childhood psychological distress explains selection into unemployment and the extent to which this process explains both the psychological effects of unemployment and the scarring effect. We find that selection into unemployment and scarring effects are both important and largely independent influences on psychological well-being, a key finding of the project. The second paper, published in Psychological Science, “Self-control and unemployment throughout the lifespan” is the first paper to examine the relationship between early life self-control and adult unemployment outcomes. It finds a significant association between higher self-control as a child and reduced unemployment throughout the lifespan in two separate cohort studies utilizing a sample size of over 10,000. The third paper, also published in Social Science and Medicine, “Childhood psychological distress and youth unemployment”, examines the relationship between poor mental health in early life and labor market entry, using a data-set of 1 million observations across two cohort studies. Although the relationship between psychological distress and unemployment generally has been exhaustively examined in the literature, this paper focuses on the relatively under-researched connection between distress measured at a young age and unemployment. The paper finds that children with poor mental health experience significantly more unemployment during their formative early years in the labour market. This paper has been published at the highly ranked journal Social Science and Medicine. In addition to the research described above, work is currently ongoing on the topic of “Mental Health and the Great Recession”, using data from the National Longitudinal Study of Youth and the European Social Survey. A complete paper is now under review at a top-ranked Economics journal.

Our central findings – a child with poor self-control or poor mental health is liable to experience significantly more unemployment during their life-time – represent significant societal costs, both in terms of the economic cost of unemployment (lost productivity, higher benefits payments) and the aversive effect on the unemployed individuals’ wellbeing (unemployed individuals are consistently rated as unhappier than the employed). There is now a substantial and growing literature on the importance of personality skills for economic outcomes. While we focus on self-control, evidence suggests that traits such as motivation, communication skills, leadership, self-esteem and self-confidence all have a part to play in determining an individual’s future income and occupation. Similarly, mental health has been called “the new frontier of labor economics” by Layard, who notes that mental health issues receive considerably less attention than physical ailments. By quantifying the economic outcomes of poor self-control and mental health, our research represents part of a long-term shift towards greater recognition of the life of the mind and the importance of ability beyond traditional measures of academic achievement and IQ scores.

The address of the project public website, if applicable