A look at the lives of the unemployed in Spain

Presenter: Climent Quintana-Domeque, Universitat d'Alacant

Abstract

There are two traditional views in economics about the causes of unemployment. One establishes that unemployment is voluntary: the unemployed prefer to remain unemployed because the current available jobs are not attractive enough to compensate them for a reduction in their leisure time. The other sees unemployment as an involuntary labor force status: the unemployed would accept jobs if those were available to them, but market failures prevent this from happening.

This paper examines the allocation of time and psychological wellbeing according to labor market status. It is well documented that, on average, the unemployed report lower levels of life satisfaction and other indicators of psychological wellbeing or mental distress (references needed), which suggests that at least, on average, unemployment is not a voluntary labor market status. However, even if unemployment is not voluntary, this does not imply that unemployment causes mental distress.

We look at the associations between time allocation across different activities (children care, sleeping, physical exercise), mental distress (difficulties to sleep and psychological wellbeing) and labor market status. In terms of time allocation, unemployed women tend to devote more time on children care. However, for men, labor market status is not related to time devoted to children care. Both unemployed men and women sleep more hours than the self-employed or employed. In terms of mental distress, unemployed men have more difficulties to fall asleep and to sleep than self-employed, while this is not the case for women. Also, unemployment and psychological wellbeing (GHQ-12 measure) are more negatively related for men than for women. Thus, the unemployed suffer, but unemployed men seem to suffer more than unemployed women.

Establishing the causal effect of unemployment on mental distress is a challenging task. There are three main channels by which an association between unemployment and psychological wellbeing may emerge in the data. First, unemployment might have a causal psychological effect that leads unemployed people to report lower levels of psychological wellbeing measures than the employed. Second, reverse causality can be relevant too: people who suffer from psychological problems are more likely to be laid off by employers if mental distress affects their job performance. Finally, unemployment and psychological wellbeing might be determined by unobserved third factors: individuals with specific personality traits could be both more likely to suffer from psychological problems and also more likely to be unemployed.

Although our estimates are not meant to have a causal interpretation, especially those related to psychological wellbeing, this does not invalidate their relevance for policy implications. We cannot argue that unemployment is causing mental distress. However, the fact that unemployed men appear both to sleep a lower number of hours and to sleep with more difficulties than the self-employed and the employed, together with their low GHQ-12 scores, suggests that the unemployed indeed suffer, and suffering is not voluntary.