Are being unemployed and being out of the labor force distinct states?: A psychological approach

https://doi.org/10.1016/0167-4870(95)00009-DGet rights and content

Abstract

Clark and Summers (1979) found a high rate of transition between unemployed and out of the labor force status. These findings led them to conclude that “many of those classified as not in the labor force are functionally indistinguishable from the unemployed.” Flinn and Heckman (1982,1983) questioned the validity of the conclusion reached by Clark and Summers.

Heretofore, the debate between Clark and Summers and Flinn and Heckman over whether the two forms of nonemployment are distinct states has been conducted by examining transition probabilities and observable external characteristics. Unfortunately, the narrowness of the debate may have prevented this issue from being resolved.

Psychologists have offered several explanations that seek to establish how experiences such as joblessness can lead to a deterioration in psychological health. For instance, unemployment may damage a person's locus of control, a concept that accounts for perceptions of personal efficacy, leaving them with a sense of helplessness. Although the psychological status of individuals in the two states of joblessness may differ, due to their respective rationales for withdrawal from the labor force, this possibility has yet to be investigated.

This paper uses data from the National Longitudinal Survey of Youth (NLSY) to examine whether a difference in psychological well-being exists between the unemployed and labor force drop outs.

We find some evidence that joblessness fosters feelings of externality. In addition, we also find evidence in favor of the stages of psychological impairment theory. Moreover, as the duration of joblessness advances so do feelings of helplessness. Finally, on balance, we offer evidence on the psychological status of the jobless that is consistent with the view of Clark and Summers that the two forms of joblessness are effectively indistinguishable.

References (59)

  • K.B. Clark et al.

    Labor market dynamics and unemployment: A reconsideration

    Brookings Papers on Economic Activity

    (1979)
  • W. Davis et al.

    Parental antecedents of internal—external control of reinforcement

    Psychological Reports

    (1969)
  • M.P. Duke et al.

    A note on locus of control as a function of father absence

    The Journal of Genetic Psychology

    (1976)
  • R. Ehrenberg et al.

    Modern Labor Economics

    (1994)
  • P. Eisenberg et al.

    The psychological effects of unemployment

    Psychological Bulletin

    (1938)
  • N. Feather et al.

    A longitudinal analysis of the effects of different patterns of employment and unemployment on school-leavers

    British Journal of Psychology

    (1986)
  • S. Fineman

    A psychological model of stress and its application to managerial unemployment

    Human Relations

    (1979)
  • S. Fineman

    White Collar Unemployment, Impact and Stress

    (1983)
  • S. Fiske et al.

    Social Cognition

    (1991)
  • C. Flinn et al.

    Models for the analysis of labor force dynamics

  • C.J. Flinn et al.

    Are unemployment and out of the labor force behaviorally distinct labor force states?

    Journal of Labor Economics

    (1983)
  • T. Frost et al.

    The measurement of self-esteem, stress-related life events, and locus of control among unemployed and employed blue-collar workers

    Journal of Applied Social Psychology

    (1991)
  • D. Fryer

    Employment deprivation and personal agency during unemployment: A critical discussion of Jahoda's explanation of the psychological effects of unemployment

    Social Behavior

    (1986)
  • F. Gonul

    New evidence on whether unemployment and out of the labor force are distinct states

    Journal of Human Resources

    (1992)
  • B. Graetz

    Consequences of employment and unemployment

  • J. Harley

    The impact of unemployment upon the self-esteem of managers

    Journal of Occupational Psychology

    (1980)
  • R. Harrison

    The demoralizing experience of prolonged unemployment

  • J. Harvey et al.

    Vivid memories of vivid loves gone by

    Journal of Social and Personal Relationships

    (1986)
  • J. Heckman et al.

    Does unemployment cause future unemployment? Definitions, questions and answers from a continuous time model of heterogeneity and time dependence

    Economica (August)

    (1980)

    • Cited by (34)

    • Stuck in the job: Does helplessness precede being locked-in at the workplace or vice versa? An analysis of cross-lagged effects

      2017, Journal of Vocational Behavior
      Citation Excerpt :

      Our results also support the theoretical idea that helplessness may lead to lack of control in specific life domains (Abramson et al., 1978), such as working life and career, and more specifically, in terms of locked-in situations at work. In respect to the reversed relationship – that is from being locked-in to helplessness over time – the result resembles mechanisms earlier detected in unemployment research, where unemployment also have been found to increase helplessness (Bjørnstad, 2006; Goldsmith et al., 1995, 1996; Rodrigues, 1997; van Ham et al., 2001). Being locked-in implies, similarly to being unemployed, that the individual is in a non-preferred work situation with limited or no control over career matters.

    • Have we cause for despair?

      2015, Journal of Behavioral and Experimental Economics
      Citation Excerpt :

      The behavior of the long-term unemployed, like that of the suicidal, may be better understood if considered through the lens of despair. Economists have long recognized that sustained unemployment can have severe adverse psychological as well as economic effects (see Goldsmith, Veum and Darity, 1995, 1996a, 1996b). While unemployment itself has been shown to be significantly important to an individual's wellbeing, it is not the loss of income, the narrowly economic, that accounts for its importance (Blanchflower and Oswald, 2004; Clark and Oswald, 1994; Knabe and Ratzel, 2011; Winkelmann and Winkelmann, 1998) but the nonpecuniary aspects of unemployment such as the social and psychological costs of unemployment (Jahoda, Laxarsfeld and Zeisel, 1933).

    • Learned helplessness, discouraged workers, and multiple unemployment equilibria

      2006, Journal of Socio-Economics
      Citation Excerpt :

      This is by economists called the discouraged worker effect and explains why Clark and Summers (1979), for example, reported that almost half of those who left the labour force still wanted work, and that many of these said that their inability to find a job was the sole reason for their withdrawal. Furthermore, Benati (2001) documented a clear counter-cyclical pattern of those out of the labour force, going to school and keeping house in the US, and Goldsmith et al. (1995) found that those unemployed and labour force drop-outs are psychologically indistinguishable. The relationship between unemployment, social psychology and unemployment hysteresis through the discouraged worker effect is discussed in Darity and Goldsmith (1993).

    • The measurement of unemployment when unemployment is high

      2006, Labour Economics
      Citation Excerpt :

      Although this objection is hard to overturn conclusively, Clark and Oswald (1994) cite longitudinal evidence collected by psychologists that sheds doubt on the reverse causality interpretation (see Warr et al., 1988), and Winkelmann and Winkelmann (1998) and Clark (2003), who use panel data to control for individual fixed effects, find that causation runs from unemployment to unhappiness. Goldsmith et al. (1995) investigate the distinctness of the searching and non-searching unemployment states by examining whether people in these two states are equally psychologically impaired, and find for the U.S. that the two forms of joblessness are effectively indistinguishable. We extend the idea that comparing levels of happiness across individuals can shed light on the nature of their unemployment.

    • A bibliometric study of reference literature on youth unemployment

      2023, Journal of Enterprising Communities

    • "Disconnected" Men: Understanding Men's Joint Roles as Workers and Romantic Partners

      2022, RSF
    View all citing articles on Scopus
    View full text
    Copyright © 1995 Published by Elsevier B.V.