Job Loss During the Pandemic: How the Safety Net Mitigated Adverse Well-being Effects

Abstract

Among life shocks, job loss stands out for its large and persistent effects on life satisfaction. Still under debate is whether its impacts are causal, whether they arise from its economic consequences or non-pecuniary effects (e.g., stigma, loss of social contacts), and the extent to which they depend on prevailing policy. In this study, we track life satisfaction in the periods surrounding the onset of the Covid-19 pandemic for adults aged 50 years and over and describe the heterogeneity of its impacts. Employment and economic experiences strongly determined life satisfaction patterns following the pandemic's start. Those who lost their job in March 2020 suffered the steepest drop in life satisfaction. Among them, those eligible for government benefits recovered after a few months. But those without access remained at lower levels of subjective well-being two years after the pandemic’s onset. We find similar patterns using a measure of mental health for both 18-50 years old and those over 50. The lower levels of subjective well-being among the benefit ineligible remain statistically significant two years after the pandemic-induced job losses despite substantial levels of re-employment. While there are differences in the characteristics of those who lost their jobs and those who had access to unemployment, we show that there were no pre-pandemic trends in life satisfaction in any of the groups. Our results highlight the importance of the safety net to protect well-being from economic shocks and run counter to the interpretation that the nonpecuniary aspects of unemployment are the sole drivers of its effects on life satisfaction.

JEL Classification: J64, I31, J26, J50, I38