Psychological effect of labor market policies

Psychological effect of labor market policies

Prof. Dr. Andreas Knabe

Work and unemployment play an important role for the quality of life of people. Studies about life satisfaction have shown that unemployment is a life event that reduces satisfaction dramatically. The influence of participating at active labor market policies on subjective well-being has not been examined in such extent so far. In this project we want to evaluate the data about cognitive and affective well-being of participants of temporary jobs (1 job), which we collected by using the Day Reconstruction Method, and compare them to other data about satisfaction from different sources (SOEP, PASS). By comparing this data to the data collected from employees and unemployed persons, we can draw conclusions about the effect of such measures on the subjective well-being of the participants and therefore about the immediate effects of such measures. 

A second project in this area is going to deal with the psychological effect of wage subsidies. A standard result of the economic theory states that in the long term it is of no relevance if wage subsidies are paid to employers or employees as shifting processes in the market ultimately lead to the same result. For this, it is necessary that it is irrelevant for employees from which sources they derive their income. The political discussion about the “Aufstocker” (recipients of top-up welfare benefits) implies that social transfers are often perceived as stigmatizing and humiliating. In this research project, we examine whether the negative effect of wage subsidies of this kind can be illustrated with the methods of happiness research. It should be examined if there are similar effects when wage subsidies are paid to the employer or the employee in case where total income of the employee is the same. If the payment of wage subsidies to the employee comes along with negative psychological effects, this would weaken the advantage of these instruments. If there is even a negative effect on the willingness to participate and the job motivation, the ability of this instrument to achieve positive employment effect would be weakened. If these effects do not arise for employer subsidies, this would imply that employer and employee wage subsidies are not equivalent and would instead be supportive of employer-oriented wage subsidies.

Last Modification: 01.03.2019 - Contact Person:

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