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Unemployment can have damaging consequences for individuals and their families. Job loss often means lower income, increased poverty risk, and worse future employment prospects. Evidence from around the world shows that those who are unemployed have worse life satisfaction, happiness, and mental health than the employed. Happiness research reveals that most of these dramatic declines in happiness and life satisfaction are due to psychological factors related to losing identity and social contacts rather than the loss of income.
In a recent paper, we show that unemployment lowers the life satisfaction of spouses living in the same household. We use German household data from 1991 to 2015 that not only trace individuals and their spouses over time but also have information on job loss due to involuntary and unexpected circumstances. These advantages allow us to study the causal effect of a spouse’s unemployment on the other partner’s life satisfaction, as measured on a scale from 0 (not at all satisfied) to 10 (very satisfied).
We find that spousal job loss lowers the life satisfaction of the indirectly-affected partner. Men’s life satisfaction declines by about 0.34 points as a result of their wives’ unemployment, while women’s life satisfaction drops by about 0.25 points after their husbands become jobless. This gender difference is not statistically significant, meaning that husbands and wives suffer just as much when their spouse becomes jobless.
How do these findings compare with the effects of becoming unemployed on one’s own life satisfaction? The spousal life satisfaction losses we document represent about one-third to one-quarter of the average life satisfaction effects for the person who is unemployed, which is quite large. Another way to quantify how much spouses care about their partners’ job loss is to utilize the so-called life satisfaction valuation approach. We simply calculate the amount of household income required to compensate the indirectly-affected spouse for the life satisfaction …