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Unemployment and spousal unhappiness: How much does your partner unexpectedly losing his or her job impact your well-being? Assistant professor Milena Nikolova digs into how companies can soften the blow for family members when carrying out lay offs – and whether or not they should.
A decade after the great recession, there has been plenty a fair amount of reflecting on just how bad things were and how much worse they nearly became. Unemployment was high and many companies laid off staff, and some people, particularly older generations, have either not been able to find new work or have wound up in jobs that they are overqualified for. Although the economy is doing so well now that companies are struggling to find qualified staff, the psychological effects of job loss are still with many men and women – and their partners and their families. Assistant professor and Rosalind Franklin Fellow Milena Nikolova carried out research that looked into how one partner unexpectedly losing their job can impact the happiness of their spouse – and no, it’s not just about money.
On how one partner losing their job impacts their spouse:
Milena Nikolova: So we find that unemployment has pretty bad negative consequences for the life satisfaction of the indirectly affected spouse, so that’s the spouse that himself or herself doesn’t lose a job… The effects that we identify for the spouses are about a third of the effect of own unemployment. So this is still pretty big.
On the impact of the gender pay gap:
Nikolova: So [in Germany], on average, women earn about 20 percent less than men. And once you adjust for factors related to women having kids and being out of the workforce and differences in education and differences in skill levels, still there remains an unexplained difference between what men and similar women earn. In Germany, if I recall correctly the gap this unexplained gap in earnings is about 7 percent. But what we did instead of looking at the gender gap is we looked only among women whose husbands become unemployed compared to women whose husbands remained continuously employed.
On what well-being actually means:
Nikolova: There are three or three dimensions of subjective well-being. So there is an effective dimension of subjective well-being to which happiness belongs and this affective dimension is about experiencing emotions at the particular point in time. Those can be positive emotions such as happiness at a particular moment in time or those emotions can be negative, such as stress, anger, worry and sadness. And in this dimension of well-being, so this happiness-stress-anger dimension as you can imagine is influenced by very momentary factors, so the nature of your morning commute, whether you have a nice cup of coffee, whether a colleague annoyed you in the elevator or on your way up etc. and in very stark contrast to this effect of you mention is the so-called evaluative dimension of subjective well-being, and life satisfaction is one such example. Because it asks you to evaluate your life as a whole, which requires some sort of cognitive reflective assessment of your life circumstances. And typically, this dimension of subjective well-being is measured using questions, like how satisfied would you say you are with your life as a whole, and it’s typically measured in scale of zero where you’re completely dissatisfied and ten is very satisfied. And there is a third dimension that is less well understood it’s about having meaning and purpose in life.
On how income loss is not the only factor:
Nikolova: Income does not seem to be explaining this large drop in life satisfaction once your partner becomes unemployed. How we know that is we run our analyses without any income variable whatsoever and we get the results that we get, and then we control for so we net out the influence of household income, and we get exactly the same results. And what is more we control for income sources that are not labor income, so income from savings, income from stock market options, et cetera, bonds, and the results remain the same. And what is more we also control for future for household income and the results remain the same. So which suggests that it’s really not through money, the loss of money or the loss of income or the worry about future income, so income in the next year, that is driving our results.
On how companies can change severance pay to soften the blow, and whether or not they ultimately should:
Nikolova: [Employers] need to keep in mind that when they’re laying off people they are let’s say unintended consequences and spillovers for spouses and also other family members such as kids, as other research shows. So perhaps these numbers and these calculations can also inform the design of severance pay. But then another thing that we note in our policy conclusions and recommendations section is that simply providing these compensations is probably not going to be an effective policy, because it can be a double edged sword. So on the one hand, yes, it might relieve some of the pain and suffering incurred from having an unemployed spouse. But on the other hand it might also prolong the unemployment duration.