The Multiplicative Effect of Individual- and Country-Level Unemployment on Life Satisfaction in 97 Nations (1981-2009)

Although the negative association between unemployment and life satisfaction is well-documented, much theoretical and empirical controversy surrounds the question of how unemployment actually shapes life satisfaction. Previous studies suggest that unemployment may endanger subjective well-being through individual experiences, contextual conditions, or a combination of both. Drawing data from the World Values Survey, European Values Survey, and World Development Indicators databases for 400,917 individuals in 97 nations (1981-2009), we use three-tiered hierarchical linear models to test four competing theory-based hypotheses: that unemployment shapes life satisfaction through individual, contextual, additive, or multiplicative effects. Our results support a multiplicative interaction between individual- and country-level unemployment. Unemployed individuals are less satisfied than workers, students, retirees, and homemakers, but this life satisfaction gap varies in complex ways depending on national unemployment rates. We discuss these findings in light of previous theoretical models and combine them with the life course perspective to argue for a model where individual unemployment is understood in comparison with diverse labor force statuses that make up the life course and within the broader context of national unemployment rates. We conclude with suggestions for public policy to promote subjective well-being through individualized and contextualized plans addressing the negative consequences of unemployment.