Young people who are at the beginning of their professional career pathway are exposed to risk of labour market exclusion. This is reflected by high rate of unemployment, low-quality and indecent employment schemes or spans of economic inequality.
In the last years, the issue of youth unemployment has been placed high in the political agendas, nevertheless little progress was achieved so far. The difficulties young people experience when looking for stable employment not only reduce their income, but also increase the probability of risky behaviours, lead to the postponing of household and family formation and have a detrimental effect on their health and subjective wellbeing.
This working paper has investigated the relationship between employment and wellbeing among young people in Germany, Poland and the United Kingdom who are just starting their careers.
As the research results show for all three countries researchers identified a strong and robust association between employment and wellbeing. The detrimental influence of unemployment on wellbeing persisted even after controlling for many observed as well (time-invariant) unobserved characteristics. Additionally, in case of Poland not only the current but also the past employment status had an influence on wellbeing which can be attributed to the so called scarring effect of unemployment.
Secondly, in every country the strongest changes in individual wellbeing were associated with transitions between unemployment and employment. Thirdly, in every country under scrutiny men suffered more from unemployment than women what is in accordance with the social production function theory. Within this theory, especially for men, the successful job is a main way of achieving a social approval.
Finally, it seems that the estimated association between unemployment and wellbeing was driven mostly by the direct non-pecuniary aspect of a job loss. In cases of Poland and Great Britain some of the individual and household income proxies turned out to be statistically insignificant. This may suggest that the indirect, pecuniary impact of job loss played a lesser role in the employment-wellbeing relationship among young people.