Would higher benefits increase the wellbeing of the unemployed? Perhaps not.

New research using the cross-national European Social Survey was released today, with a special emphasis on the relationship between the recession, the labour market and subjective wellbeing.  A key finding of the research is that in countries with welfare systems that generally provide high unemployment benefits (the Nordic countres), the unemployed tend to have higher levels of subjective wellbeing than their counterparts in countries with ungenerous benefits (like the UK).

This raises an important question.  Would increasing the value of benefits raise the wellbeing of the unemployed?  In theory, higher benefits could make unemployment more bearable by reducing poverty and alleviating anxieties about making ends meet.  The ESS findings come at a useful time policy-wise.  At the weekend, Labour announced new plans to back an increased level of unemployment benefit.

Looking first at the life satisfaction levels of the whole population, we can see the kind of relationship we might expect: those with the largest incomes have higher life satisfaction, those with the smallest incomes have the lowest life satisfaction.  For ease of interpretation, the results below are based upon a sample that excludes the richest 30 per cent or so of respondents; the vast majority of which are not unemployed, which makes any analysis (based upon tiny numbers) problematic.

Average life satisfaction by income group, Citizenship Survey (2009/10 and 2010/2011)

So what happens when we divide this up by employment status?  The results below are, in this instance, perhaps what we might not expect.  For those within the employed group, the higher earners have the highest life satisfaction, but only just.  This suggests that being in work is pretty good for life satisfaction even if you are on a relatively low income.

Average life satisfaction by income group and employment status

Yet the question we're really interested in here is whether a higher income protects unemployed people against a loss in life satisfaction.  And the answer seems to be no.  The average life satisfaction for unemployed people in the highest income group is 3.6; remarkably, for the lowest income group of unemployed people it is slightly (though perhaps not significantly) higher, at 3.7.

What this suggests is that unemployment corrodes wellbeing irrespective of how much money a person has whilst they're unemployed.  Yet this is not necessarily an argument against higher unemployment benefits.  The argument for higher benefits is based upon a much wider range of arguments than boosting life satisfaction: reducing poverty, giving dignity to people, easing income anxieties and allowing the children of unemployed people to be adequately provided for.

But what this does mean, I think, is that we have to consider the stigma attached to unemployment and the social costs that follow as much greater problems than purely economic ones.  So whilst higher benefits may solve some of the issues associated with unemployment - such as intense poverty and income insecurity - they cannot, at least alone, deal with some of the other problems of unemployment. Not least, why it makes people feel so bad.