Informal Employment and Subjective Well-Being in Europe: Evidence from the European Social Survey Data

Work constitutes one of the main spheres of human life. Hence, a person’s perception of work, or a type of job in particular, may affect their subjective well-being. The absence of any written labour contract, also known as “informal employment”, leads to uncertain prospects and an unstable low income situation, resulting in low job satisfaction. This paper attempts to reveal the impact of informal employment on subjective well-being in European countries by examining the differences between countries through employment protection legislation. Informal employment in countries with liberal employment protection legislation has a less negative effect on the subjective well-being of employees, than countries with strict legislation. The results, based on European Social Survey (2010) data, demonstrate a negative relationship between informal employment and subjective well-being. Countries with strict labour legislation face lower levels of subjective well-being due to a higher share of informal workers and a greater difference in happiness scores between the insiders (permanently employed) and outsiders (informally employed).