Subsidized Employment and Life Satisfaction

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Research on life satisfaction indicates that labour market policy affects well-being and behaviour beyond its impact on income and leisure. This project analyses the non-monetary effects of subsidized employment. It combines the methodology known from measuring well-being losses from involuntary unemployment with modern methods of empirical labour market research to assess subsidized employment. Using German data of the Panel Labour Market and Social Security (PASS), the impact of a wage subsidy paid to employees (ergänzendes Arbeitslosengeld II) on subjective well-being is analysed. The research project mainly focuses on the well-being effect of being an employed welfare recipient compared to being unemployed and receiving welfare and being employed without receiving in-work benefits. The first part of the project investigates to what extent subsidized employment increases life satisfaction compared to unemployment, if it is considered equal to non-subsidized employment and how these effects change over time. Part 2 examines whether the effects of wage subsidies depend on demographics and individual employment biographies, using survey data that is combined with administrative data (PASS-ADIAB). Part 3 validates the utility effects found by looking at the impact of receiving in-work benefits on actual behaviour. Using SOEP data, part 4 analyses to what extent the impact of subsidized employment originates from changes in affective well-being, future prospects and social identity.