Spillover effects of social policies. Can the state support for the unemployed affect employees' health and wellbeing?

The aim of this report is to provide a review of the effects of labour market policies on health and wellbeing among both the unemployed and employees, but with focus on the latter group. We elaborate on the implications of the economic theory of insurance, as well as the capability approach proposed by Sen (1999), which highlights the role of the ability to decide about oneself. While unemployment implies reduced capabilities, policies giving the unemployed a chance to get involved in alternative activities such as training can be considered as offering agency and improving capabilities. We also relate to theories on the function of work for health postulated by Nordenmark and Strandh (1999) to explain how activities offered within active labour market programs may constitute a functional equivalent to employment and hence affect health and wellbeing positively. Finally, we explain theoretical mechanisms channelling policy impacts beyond the unemployed, i.e. the group of direct beneficiaries of passive and active labour market policies