1. Understanding unemployment through well-being – why motivation-focussed activation policy may be misguided Good Lives and Decent Societies Workshop 2 Dr. Jan Eichhorn (Jan.Eichhorn@ed.ac.uk)

2. The logic behind motivational incentives

3. The rational decision making nexus Cost of unemployment Gain from employment

4. The rational decision making nexus Cost of unemployment Gain from employment Unemployment benefits

5. The rational decision making nexus Cost of unemployment Unemployment benefits Reduced incentive to seek employment

6. Implication: Optimal choices Cost of unemployment Gain from employment Unemployment benefits Those “choosing“ unemployment at this benefit level: Optimal choice Equivalent utility (subjective well-being )

7. The problem: assumptions about motivations  Well-being research as counter to traditional utility conceptions (as revealed preferences) [i]  Negative effects of individual unemployment [ii]  Decrease in life-satisfaction beyond income loss [iii]  Long-run scarring effects: limited adaptation [iv] i. Frey 2008, Bosco 2005, Di Tella & MacCulloch 2006; ii. Clark & Oswald 1994, Ouweneel 2002; iii. Winkelmann 2009, Diener & Biswas-Diener 2008; iv. Clark et al. 2001, Lucas et al. 2004

8. Public views Views on unemployment benefits

9. Benefits impact in EU comparison

10. The effect of unemployment across the EU European Values Study 2008 (Eichhorn 2013, Social Indicators Research)

11. The effect of unemployment across the EU Direct effectInteraction with DV:U LN GDP/cap LN U Benefits LN U Rate LN Inflation Inequality Age-Dep. Ratio Autonomy

12. Those “needing” motivational activation in the UK

13. 8 Subjective well-being by economic activity (UK) UK Annual Population Survey 2012 Mean life-satisfaction (1..10) Employed7.6 Self-employed7.5 Unemployed (ILO)6.6 Student7.8 Retired7.8 Sick/Disabled5.7 Looking after family/home7.5 Other/no reason7.0 Don‘t want/need a job8.2

14. 8 Subjective well-being by economic activity (UK) Mean life-satisfaction (1..10)Percentage Employed7.649.0 Self-employed7.57.9 Unemployed (ILO)6.66.0 Student7.83.6 Retired7.821.1 Sick/Disabled5.75.1 Looking after family/home7.55.4 Other/no reason7.01.4 Don‘t want/need a job8.20.6 UK Annual Population Survey 2012

15. 8 Subjective well-being by economic activity (UK) Mean life-satisfaction (1..10)Percentage Unemployed (ILO)6.632.4 Sick/Disabled5.727.8 Looking after family/home7.529.2 Other/no reason7.07.6 Don‘t want/need a job8.23.0 UK Annual Population Survey 2012 Economically unemployed/inactive (non-retired, non-students)

16. Subjective well-being by economic activity (UK) Mean life-satisfaction (1..10)Percentage Unemployed (ILO)6.675.3 Other/no reason7.017.8 Don‘t want/need a job8.27.0 UK Annual Population Survey 2012 Economically unemployed/inactive (non-retired, non-students, non-domestic, non- sick/disabled)

17. Subjective well-being by economic activity (UK) Mean life-satisfaction (1..10)Percentage Unemployed (ILO)6.675.3 Other/no reason7.017.8 Don‘t want/need a job8.27.0 UK Annual Population Survey 2012 Economically unemployed/inactive (non-retired, non-students, non-domestic, non- sick/disabled) The group satisfied (accommodated) in an economically inactive state

18. Subjective well-being by economic activity (UK) Mean life-satisfaction (1..10)Percentage Unemployed (ILO)6.675.3 Other/no reason7.017.8 Don‘t want/need a job8.27.0 UK Annual Population Survey 2012 Economically unemployed/inactive (non-retired, non-students, non-domestic, non- sick/disabled) The group satisfied (accommodated) in an economically inactive state Proportion claiming benefits: 36%  2.5% of those unemployed/inactive (“able“) face the utility satisfaction problem

19. Subjective well-being by economic activity (UK) UK Annual Population Survey 2012 A good starting point for a generally applicable policy?