For better or for worse? Happiness among unemployed in 19 European countries - The effect of the economic crisis of 2008

As previous research has shown that unemployment is followed by lower levels of happiness and life-satisfaction, few studies have examined how this relationship is affected by an economic crisis. The economic crisis, which hit Europe in the autumn of 2008, provides an interesting case for such analysis. Using multilevel regression analysis, 19 European countries are analysed with data from 2006 and 2010. Data for the individual level is collected from the European Social Survey, and data for the country level is collected from Eurostat. This thesis studies the relationship between unemployment and happiness/life-satisfaction, and how this relationship has been affected by the economic crisis of 2008. Furthermore, the thesis examines how the relationship between unemployment and happiness/life-satisfaction is moderated by welfare generosity. The major finding in the thesis is that the economic crisis, with rising unemployment rates, has resulted in a reduced negative effect of unemployment on happiness/life-satisfaction. This is explained by a change of social norms; rising unemployment rates in Europe has resulted in a ‘normalization’ of being unemployed. Moreover, the statistical analysis showed a significant negative effect from income inequality on happiness/life-satisfaction. Yet for the group of unemployed a reverse effect was found, indicating that the negative effect of unemployment is reduced, as the income inequality increases. Still, this is not considered as a likely causal effect. The effect is instead understood from the fact that these countries also have higher unemployment rates which reduces the social stigma of unemployment in these countries