Losing your job is one of life’s most miserable experiences – more so than getting a divorce. One reason for this is obvious: unemployment removes a constant stream of income. Even so, the unemployed also report substantially lower levels of happiness relative to those who are employed but have the same income. The psychic cost of unemployment can in part be explained by the social stigma and loss of self-esteem job loss entails.
There is a flipside to this, though. While unemployment lowers well-being for both the unemployed and the employed (perhaps by creating expectations of job loss), its effect on those already unemployed is notably reduced when a lot of other people – colleagues, neighbours, people living in the same region or even in the same household – are also unemployed.
The reason is simple, argues the economist Andrew Clark of the Paris School of Economics. Where being unemployed is the norm, the impact on your reputation caused by job loss is lessened. In other words, it feels relatively OK to be unemployed when a lot of others are also unemployed.