Does educational level modify the effect of involuntary job loss on well-being?

Jornt Mandemakers, Tilburg University
Christiaan W. S. Monden, University of Oxford

We use the first 17 (1991-2007) waves of the British Household Panel Study to examine the effect of involuntary job loss on well-being. More specifically, we study whether the level of educational attainment modifies the effect of involuntary job loss on the short (1st year after job loss) and long term (4 to 6 years). We hypothesize that higher educated people suffer less from an involuntary job loss on the short term because they experience fewer direct stressful effects of job loss and they have higher re-employment chances. The stress of job loss may be moderated by educational level because higher educated individuals have more social, psychological, and economic resources. As the higher educated are more likely to find re-employment after involuntary job loss, they do not suffer the negative effects of unemployment (loss of income, status, meaningful activity, purpose). For the impact of job loss on well-being on the longer term, two competing hypotheses were derived. On the one hand, better educated individuals have more resources and are more likely to find re-employment (which simply extends the first hypothesis). On the other hand, it may be harder for higher educated individuals to find suitable re-employment because they lose better jobs and have higher aspirations. Thus, involuntary job loss may put the higher educated at a greater risk of downward mobility and therefore reduce their well-being. In addition, lower aspirations and higher unemployment among peers may lead lower educated individuals to better adapt to being unemployed than higher educated individuals. Preliminary results (fixed effects regression analyses) indicate that higher education decreases the effect of involuntary job loss on the short term (first year), whereas on the longer term (4 to 6 years) the opposing effects may cancel each other out as we no longer find a modifying effect of education.