The Effects of Unemployment and Insecure Jobs on Well-Being and Health: The Moderating Role of Labor Market Policies

Abstract

Labor market insecurities have been growing in Europe and previous research has illustrated that unemployment and insecure jobs negatively affect individuals’ well-being and health. Although empirical evidence suggests that these effects vary substantially across different welfare states, we still know little about the moderating role of specific labor market policies. Taking a cross-national comparative perspective, this article investigates how passive and active labor market policies (PLMP, ALMP) as well as employment protection legislation (EPL) shape the experience of unemployment and insecure jobs. We complement micro data of round 1–6 (2002–2012) of the European Social Survey with time-varying macro indicators of PLMP, ALMP, and EPL. The data include about 89,000 individuals nested in 112 country-rounds and 26 countries respectively. We apply three-level random intercept models as well as pooled linear regression models including country fixed effects. The results show that labor market policies are important in shaping the experience of unemployment, but are less relevant for workers in insecure jobs. Specifically, higher unemployment benefit generosity buffers the negative effects of unemployment on well-being but not health. Moreover, we discuss different interpretations for the finding that higher ALMP expenditures are associated with more negative effects of unemployment on well-being and health. With respect to EPL it is found that in countries with high insider protection, deregulating the restrictions on the use of temporary employment increases the negative effects of unemployment on well-being and health.