Unemployment and well-being of Europeans across the life cycle: The role of countries’ macroeconomic situation

Unemployment impairs individuals’ well-being and health and there is some empirical evidence showing that macroeconomic conditions can moderate these effects. This paper goes a step further and investigates differences in how macroeconomic indicators of European countries’ economic situation relate to individual subjective health and well-being, and also moderate the relationship between individual labour market exclusion and these outcomes across age groups: young individuals (aged 15-29), prime working age adults (aged 30-49, base category) and pre-retirement age adults (aged 50-64). We used two different macroeconomic indicators to define macroeconomic situation: country-level unemployment rate (UR) and gross domestic product (GDP). Both indicators were disaggregated into long-term economic trend and business cycle shocks using Hodrick-Prescott filtering to allow distinguishing between expected and unexpected change in macroeconomic circumstances. We used the European Social Survey (ESS) individual-level data from 35 European countries for 2002-2014. Multi-level analysis with three levels were run for men and women separately. Results revealed differences in how individual-level unemployment related to well-being depending on the age group, with pre-retirement age group adults’ health and well-being suffering the most. Also, macroeconomic indicators were found to moderate the relationship between individual-level unemployment and subjective health and well-being with some noticeable differences between age groups, and with GDP trend having the most sizeable influence.