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Scarred from the past or afraid of the future?

Unemployment and Job Satisfaction across European Labour Markets

Thomas Lange

Abstract

Previous research has shown that both, past unemployment and anticipated future unemployment

have a detrimental impact on employees’ attitudes and behaviours, which may affect organizational

performance. Surprisingly, however, very little is known about the relative impact of past

unemployment compared with current job insecurity. Although it is possible that both effects operate

simultaneously, the analysis in this paper, focused on employees’ job satisfaction and utilising a set of

cross-sectional data derived from the European Social Survey 2006-07, reports on a strongly

pronounced insecurity effect: anticipated unemployment substantially reduces employees’ job

satisfaction. Interestingly, including the perceived risk of future unemployment as a separate

predictor variable in ordered probit regressions relegates the experience of past unemployment to a

statistically insignificant coefficient and thus weakens the ‘scarring’ hypothesis. These results hold

true even when several socio-demographic characteristics and proxies for individual personality

traits are controlled for. Implications for organisations and human resource practitioners and scope

for future research endeavours conclude the analysis.

1. Introduction

Organisational change and restructuring, the growing implementation of downsizing practices and

respective unemployment risks at the level of the employee have all become commonplace

phenomena in an increasingly competitive business environment. In this context, it is perhaps

unremarkable to note that there have been major changes to the employee-employer relationship. It is

now argued that a new psychological contract has emerged, which no longer promotes lifetime

employment and loyalty to the firm. Instead, the focus has seemingly shifted towards the paradigm of

‘employability’ (Martin, Staines and Pate 1998; Forrier and Sels 2003) in response to the fear that

jobs may be dramatically altered or eliminated altogether. Unemployment and feelings of job

insecurity have certainly become an all too common experience in many employees’ working lives.

Whilst the effects of job loss on those who are currently and directly affected by the layoff

(Leana and Feldman 1994) as well as the negative effects on the firm’s survivors (e.g. Kalimo, Taris

and Schaufeli 2003; Sahdev 2003) have figured prominently in the organisational research literature,

there has also been the development of a substantial literature devoted to the inter-temporal effects of

unemployment - the impact of past unemployment as well as the effects of perceived future

unemployment risk.

By reference to the experience of previous unemployment spells, the economics discourse in

the subjective well-being arena, itself an extension of earlier practice in psychological scholarship, has

demonstrated empirically that past unemployment can lead to a marked deterioration in current life

satisfaction. This ‘scarring effect’ of past unemployment (Clark, Georgellis and Sanfey 2001),

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suggesting that unemployment experienced in the past inflicts permanent damage on the human

psyche and thus leaves a psychological scar, has also been noted in assessments of several satisfaction

domains, including the job satisfaction of workers who have become re-employed since their

unemployment experience.

Job insecurity, as the perceived risk or fear of future unemployment, has also been shown to

lead to adverse attitudinal reactions in the workplace - intentions to quit, reduced commitment, and

reduced satisfaction (e.g. Chirumbalo and Hellgren 2003; Laine, van der Heijden, Wickström,

Hasselhorn and Tackenberg 2009). Insecure employees frequently experience increased psychological

distress and channel their anxiety through various coping strategies, which may lead to detrimental

outcomes for the organisation. Comparing the impact of job insecurity and short-term unemployment

spells on individuals’ psychological well-being, De Witte (1999) notes that both experiences appear to

be equally harmful. This finding builds on earlier results in the stress literature, suggesting that the

fear of losing one’s job is as detrimental to individuals’ health and well-being as losing the job itself

(Lazarus and Folkman 1984).

The unemployment – subjective wellbeing relationship is clearly of interest from an HR-

practitioner perspective since the widely reported negative impact of past as well as potential future

unemployment manifests itself in detrimental effects in workplace behaviour. Studying the impact of

past unemployment and future unemployment risk on employees’ job satisfaction is thus particularly

relevant, especially since the latter construct has been shown to serve as a powerful predictor for such

employee behaviours as commitment, motivation, absenteeism, quitting intentions, and other affective

responses to aspects of the job or the employer. Surprisingly, however, very little is known about the

relative impact of past unemployment compared with current job insecurity on employees’ job

satisfaction. Is it primarily past unemployment or the perceived risk of future unemployment that

serves as the driving force behind the detrimental impact on employees’ reduced happiness at work?1

Recently, the economics discourse attempted to disentangle the impact of past unemployment

and future unemployment risk on individuals’ generic well-being (life satisfaction). In their analysis,

using longitudinal German data and correcting for potential causality problems via fixed-effect

models, Knabe and Rätzel (2011: 283) suggest that “the scar from past unemployment operates via

worsened expectations of becoming unemployed in the future, and that it is future insecurity that

makes people unhappy”. Although constrained by data on individuals in Germany only and a sole

focus on life satisfaction, their results nevertheless raise further questions about the relative impact of

past unemployment and perceived future unemployment risk on other life domains, including job

satisfaction.

Against this background, the intention of the present paper is to adduce additional results to

the unemployment – subjective wellbeing relationship and perform a complementary analysis focused

on employees’ job satisfaction across several European countries. To this end, the present study

utilises data derived from the 2006-07 European Social Survey.2 The general survey captures

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observations for 25 European countries and provides a rich, cross-sectional source of respondents’

economic, demographic and personal characteristics, together with information on respondents’ job

satisfaction, personality disposition, past unemployment experience during the last 5 years and an

individual’s perception of future unemployment risk. The latter is differentiated by the degree of this

risk, ranging from ‘very likely’ to ‘not at all likely’. The data set at our disposal is thus particularly

suited for the purpose of this analysis.

The remainder of this paper is organised as follows: a brief summary of the reported impact

of past unemployment and the perceived risk of future unemployment on several well-being indicators

is provided in Section 2. In Section 3, details of the data, econometric framework and data limitations

are introduced, followed by the results and respective interpretations in Section 4. Section 5 provides

some concluding remarks.

2. Unemployment, Job Insecurity and Well-being

Spanning across several academic disciplines, the impact of both, past unemployment and job

insecurity on individual well-being in general, and workplace behaviour in particular, has attracted an

enormous, nuanced and often controversial literature. In this study, only a ‘snapshot’ summary of the

latter is attempted.

At the outset, it is worth noting that unemployment related effects on well-being can be

positioned in a historical context. To the extent that the ‘value of unemployment’ can be linked to a

utility trade-off between time spent in leisure and time spent in paid work, the relationship between

unemployment and well- being can be traced back to simple labour supply models, basic utility and

indifference curve analyses in the economics discourse. Indifference curve analysis, developed by

Edgeworth, Pareto and others in the first part of the 20th century and derived from ordinal utility

theory (Blaug 1985), posits that individuals can always rank any consumption bundles by order of

preference. Strictly speaking, therefore, it would be reasonable to expect that the unemployed report

higher levels of well-being than the employed, holding income constant. Put differently, a

substantial degree of disutility is gained from time spent in paid work, because this time involves

effort and clearly distracts from the ability to contribute to activities that individuals would

otherwise enjoy. On this basis, it is reasonable to argue that people should engage in work solely

because their wage payments compensate for the opportunity costs associated with foregone

leisure.

Beyond economists’ simple labour supply model, however, numerous examples in the

psychology literature serve as testimony to support the claim that there are substantial, non-

pecuniary costs associated with unemployment, just as they are substantial non-pecuniary

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benefits associated with working. Eisenberg and Lazarsfeld (1938) were amongst the first

psychologists to demonstrate, albeit with entirely descriptive methods, that unemployment can lead to

emotional destruction. What is more, extending their analysis to unemployment risk and job

insecurity, they note that “just having a job itself is not as important as having a feeling of economic

security. Those who are economically insecure, employed or unemployed, have a low morale.”

(Eisenberg and Lazarsfeld 1938: 361). These early observations are consistent with subsequent

empirical findings, which suggest that unemployment can cause numerous detrimental psychological

effects, including anxiety, lack of self-esteem, limited locus of control, limited regularity associated

with a working day, limited social contact and a weakened definition of personal status, identity and

self-worth (Jahoda 1981, 1988; Judge, Locke and Durham 1997; McKee-Ryan, Song, Wanberg and

Kinicki 2005; Paul and Moser 2009). It follows that individuals who experience unemployment, or

are at risk of becoming unemployed in the future, worry about more than labour income. Rather, the

withdrawal of a variety of latent functions in life appears to highlight the true destructive nature of

unemployment.

In the literature on workplace behaviour, these detrimental effects continue to be reaffirmed.

Previous studies in the psychological discourse have argued, although often on the basis of very small

data samples, that past unemployment causes long-lasting damage even when individuals have

become re-employed (Mallinckrodt 1990). Utilising larger data sets and building on the influential

work by Clark, Georgellis and Sanfey (2001), the impact of past unemployment on job satisfaction is

now firmly established in the empirical literature. Based on data from the European Household

Community Panel, for example, Kaiser reminds us that “the experience of short or long term spells of

unemployment in the past causes a consistent dissatisfaction with the current job, regardless of the

considered job satisfaction category. This, in turn, clearly supports the hypotheses of so-called

‘scarring effects of unemployment’ […]” (Kaiser 2007: 87). As mentioned previously, these findings

are particularly relevant in a workplace behavioural context since a large number of studies have

demonstrated that job satisfaction serves as a strong empirical predictor for employees’ commitment,

motivation, quitting intentions and even changes in culturally motivated attitudes (e.g. Cotton and

Tuttle 1986; Judge, Thoresen, Bono and Patton 2001; Saari and Judge 2004; Lange 2009, 2010).

In a similar vein, the impact of job insecurity on individual well-being measures has attracted

a substantial literature, with contributions across several academic disciplines. A number of studies

have assessed the health of unemployed individuals and compared it with symptoms of insecurely

employed workers. Although it is often assumed that the stress levels of the unemployed are

particularly heightened, similar levels of distress have also been reported for individuals who face job

insecurity (e.g. De Witte 1999). Interestingly, it has been noted that the level of distress fell for those

who were ultimately laid off, whereas levels of distress and burnout remained high for a comparison

group of employed workers whose job futures continued to be uncertain (Dekker and Schaufeli 1995).

The literature on impaired well-being in the health arena has also provided insights on the causality

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direction of the relationship between job insecurity and mental distress. So observe Hellgren and

Sverke (2003), using longitudinal questionnaire data that job insecurity does indeed lead to mental

health complaints, whereas the reversed effects were shown to be statistically insignificant.

In the specific context of workplace behaviour, job insecurity was found to be strongly and

negatively associated with organisational commitment, job satisfaction and other organisationally

oriented attitudes and behaviours (e.g. Lim 1997), whilst it was reported to be strongly and positively

associated with the inclination to leave the organisation (e.g. Cavanaugh and Noe 1999). More

recently, it has been noted that job insecurity is strongly linked with various forms of workplace

aggression (Appelbaum, Deguire and Lay 2005) and that alcohol consumption also interacts with job

insecurity to predict aggression against subordinates (LeBlanc and Barling 2004). Insecure employees

have been shown to display lower creativity scores than their securely employed counterparts (Probst,

Stewart, Gruys and Tierney 2007), and a recent meta-analytical analysis also reported on a strong and

negative association between job insecurity and job performance (Cheng and Chan 2008).

Finally, in one of the few studies that assess the impact of both, a past experience and an

anticipated future reality in a work context Kalimo, Taris and Schaufeli (2003) examined workers’

well-being in Finland as a function of surviving previous downsizing and expectations concerning

future downsizing. The past experience of downsizing survival as well as the anticipation of future

downsizing was associated with elevated levels of psychological strain, cynicism, and absenteeism

behaviour. Feelings of inequity were also noted, and workers with elevated levels of such feelings

also considered early retirement more often than others. The statistical effects, although overall

relatively small, were reported to be stronger when downsizing was thought to lead to layoffs.

The findings on the impact of past unemployment and future unemployment risk clearly have

important implications from both, the individual and the organisational perspective. Surprisingly,

however, despite a plethora of scholarly contributions, we have yet to uncover if these experiences

display significantly different or broadly equal effects on the reduction of employees’ reported

satisfaction scores. By specific reference to job satisfaction, the present study aims to close this gap in

the literature. The data, respective limitations and empirical specifications in support of this

endeavour are brought forward in the following pages.

3. Data and Empirical Specifications

The data for this analysis originates from the 2006-07 European Social Survey (hereafter ESS). The

general survey is a cross-sectional account and covers responses from 25 European countries. ESS

contains detailed information on job satisfaction and various socio-demographic characteristics,

including information on age, gender, marital status, health, income and educational attainment. A

number of studies also uncovered the positive impact of opportunities for ongoing education and

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training on workers’ job satisfaction (Gazioglu and Tansel 2006). Since information on participating

in training courses, lectures or conferences during the past 12 months is available in the ESS in the

form of a dummy variable, this information is also included in the empirical analysis.

Crucial to the aim of the present study, ESS also allows for access to information on

respondents’ experience of unemployment in the past 5 years and reports on the anticipated risk of

future unemployment in the next 12 months. Observations for the past unemployment variable

constitute a sub-section of those respondents who answered positively to the question: “Have you ever

been unemployed and seeking work for more than 3 months?” Limiting the analysis to an

unemployment experience within the past 5 years naturally results in a loss of usable information,

since individuals with an unemployment experience of more than 5 years ago are excluded from the

assessment. However, a time constraint on the unemployment experience was nevertheless deemed

appropriate, especially since set point theory (Headey and Wearing 1992) would predict that

unemployment experienced a very long time ago – say some 20 or 30 years ago - may no longer affect

an individual’s well-being today. Notwithstanding these remarks, recent research on set-point altering

consequences of unemployment needs to be acknowledged. In this context, it is argued that on

average, previously unemployed individuals do not completely return to their former levels of

satisfaction, even after they become reemployed. It is thus suggested that certain life events, such as

unemployment, can have a strong influence on long-term levels of subjective well-being (e.g. Clark,

Georgellis, Lucas and Diener 2004).3 However, these arguments may not hold for single

unemployment spells (Headey 2008), and may apply more strongly to generic unemployment rather

than a previous experience of layoffs (Clark, Diener, Georgellis and Lucas 2008). Of particular

relevance to the chosen time constraint in the present analysis, set-point altering consequences have

not been assessed over a very prolonged period of time, but appear mostly restricted to lag effects of

up to 5 years. On this basis, the present study proceeds with caution and focuses on a 5-year

timeframe for the experience of previous unemployment.

Proxy variables for levels of self-esteem, generalised self-efficacy, locus of control, and

neuroticism are also available. Accounts of external core evaluations are also added. Whereas the

former represent self-appraisals, the latter represent appraisals individuals make of their external

environment, pertaining to other people and the outside world in general. These variables capture

values which are broadly consistent with personality traits that are said to serve as strong dispositional

predictors of job satisfaction (Judge, Locke, Durham and Kluger 1998). Table 1 lists the chosen

variables for each dispositional category.

[Table 1 near here]

The inclusion of these variables is deemed important, since our cross-sectional data does not

allow us to control for time-invariant personality traits. Ignoring these traits would thus raise doubts

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about the causality of the relationship between unemployment and job satisfaction. For example,

anxious employees or employees with low levels of self-esteem may experience more frequent

unemployment spells, or may be more pessimistic about their future job prospects. Past

unemployment or the perception of future unemployment risk could thus be correlated with lower

levels of job satisfaction, yet the relationship could be simultaneous rather than causal. Although the

cross-sectional data at our disposal cannot completely overcome these potential causality problems,

by controlling for several personality traits the risk is reduced.

By excluding countries with missing or incomplete information on the main variables of

interest, the analysis is restricted to the following 17 countries: Austria, Belgium, Bulgaria,

Switzerland, Germany, Denmark, Spain, Finland, France, United Kingdom, Netherlands, Norway,

Poland, Russian Federation, Sweden, Slovakia and Slovenia. The focus of the analysis is on

employees in full-time employment.4 Workers in agriculture, the fishing industry and the armed

forces are excluded. Further excluding observations with missing or inconsistent values and restricting

our sample to individuals between 18 and 65 years of age yields an effective sample of 3411

observations - 1714 for male and 1697 for female employees. In order to avoid relatively small

samples at country level and respective estimation biases, a pooled data sample for the chosen

countries was created. As such, the present study focuses on Europe-wide data covering responses

from a number of countries, rather than data for single economies. The downside of this treatment is

that potentially important contrasts between more narrowly defined groups may moderate the results.

For example, a potential risk may originate from the possibility that insecure individuals may have

self-selected into more secure jobs because of a specific country’s employment protection legislation.

However, in controlling for country-specific effects, the residual risk is mitigated by including

country dummies in the regressions.

Job satisfaction in the ESS is an ordinal categorical variable on a scale of 0–10, where 0

represents ‘‘extremely dissatisfied’’ and 10 represents ‘‘extremely satisfied’’. Specifically, the survey

question on job satisfaction asks: ‘‘All things considered, how satisfied are you with your present

job?’’ The experience of unemployment during the past 5 years is measured by a dummy variable.

The variable on the perception of future unemployment risk is ordinal-categorical in nature, ranging

from ‘very likely’ to ‘not at all likely’, in response to the question: “How likely would you say it is

that you will become unemployed in the next 12 months?”

The definitions and sample means of all variables used in the empirical analysis are presented

in the Appendix.

Based on the above sample, job satisfaction regressions are performed, using an ordered

probit model. In the context of the present study, it is assumed that the subjective measurement of job

satisfaction is determined by a transformation of employees’ characteristics into a cardinal latent

index, Si*, which is interpreted as a proxy for unobserved utility. The index follows the normal

distribution with mean µi and unit variance [Si* ~ N (µi , 1)]. In formal terms, Si

* is given by:

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iii ezS * , (1)

where iz is a vector of explanatory variables describing employees’ characteristics, represents a

vector of parameters to be estimated and ie is a random error term, which is assumed to be normally

distributed. The observation mechanism is

Si = j if τj-1 ≤ Si* ≤ τj (2)

for j = 1, …., J, where J is the total number of categories.

Given the constraints τl < τm for all l < m and τ0 = -∞ and τJ = ∞, the cardinal index of

unobserved utility is subsequently mapped into observed subjective ordinal evaluations of job

satisfaction, iS , which are determined from the model as follows:

.10

.

.

.

2

1

0

*

10

3

*

2

2

*

1

1

*

i

i

i

i

i

Sif

Sif

Sif

Sif

S

(3)

i , with i = 1, …, J, denotes thresholds to be estimated along with the parameter vector .

The interpretation of this regression model is based on coefficients and, therefore, accounts for the

sign and statistical significance. It should be noted that the parameters do not calculate marginal

effects on job satisfaction. Positive signs for the estimated parameters indicate higher levels of job

satisfaction as the value of the associated variable increases. In other words, a positive value for

reveals that the entire distribution of Si* moves to the right. With a decreasing value of the associated

variable, negative signs for suggest the converse.

4. Empirical Results and Interpretations

Before the above mentioned regressions are performed, it is worth noting that the experience of past

unemployment may be an indicator of an employee’s perceived risk of future unemployment. This

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scenario is certainly corroborated in Table 2. Amongst the employees in our sample who experienced

unemployment during the last 5 years, over 30 per cent reported that becoming unemployed again in

the next 12 months is likely or very likely. This compares with less than 15 per cent of respondents

who did not report on past unemployment. Similarly, over 86 per cent of those without a previous

unemployment experience reported that future unemployment is not very likely or not at all likely.

The respective proportion reduces to just over 67 per cent for those employees who experienced

unemployment in the past. Building on these rudimentary findings, it is thus possible to conceptualise

that past unemployment affects an employee’s job satisfaction directly via the past experience of

unemployment, and indirectly via the psychological impact on the perceived future risk of becoming

unemployed.

[Table 2 near here]

Based broadly on the methodological specifications by Knabe and Rätzel (2011), the effect of past

and potential future unemployment can be disentangled by introducing separate predictor variables

and running cumulative, sequential regression models, which allow us to control for these variables in

a step-wise manner. This is the approach taken in the present study. In the first sequence, the ordered

probit model is executed with standard socio-demographic background variables and a variable

representing the experience of past unemployment only. The results, shown in column (1) of Table 3,

are consistent with previous cross-sectional research on job satisfaction.

Specifically, the impact of age on employees’ job satisfaction displays the frequently

observed U-shape, which Clark, Oswald and Warr (1996) attribute to lifecycle, non-job related

aspects of individuals’ circumstances. The results also indicate that men are, on average, less satisfied

with their job than their female counterparts and that being married exhibit a positive impact on job

satisfaction, although neither effect is statistically significant at the conventional levels. Self-reported

health ratings display a positive and statistically significant impact, reflecting perhaps the fact that

those employees who benefit from good health tend to report higher levels of satisfaction with all

aspects of their life (which may spill-over into the job domain) or because they are generally more

likely to be in satisfying jobs, compared with those who are limited by poor health or disability

(Georgellis and Lange 2007). Again broadly in line with previous cross-sectional research in the

subjective well-being arena, middle and upper level income has a positive effect on employees’ job

satisfaction, compared with lower level income as the reference category. Educational attainments, on

the other hand, display a negative impact, although only upper-level education is statistically

significant. In contrast, the effect of ongoing education and training opportunities during the past 12

months is strongly and positively associated with employees’ job satisfaction. The negative impact of

educational attainments may be explained by reference to discrepancy theory (Locke 1976). The

result may thus be linked to employees’ perception of the correspondence between what they expect

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and what they receive at work, in the sense that higher educational attainments may have resulted in

expected pecuniary or non-pecuniary benefits, which have failed to materialise. This is not an

uncommon interpretation in the literature (e.g. Robinson, Murrells and Clinton 2006). Certainly in

routine or less demanding jobs, it is now widely accepted that well educated employees often feel

more frustrated and less satisfied than their less educated counterparts (e.g., Vila and Garcia-Mora

2005). The strong and positive effect of ongoing training opportunities, to take a very different

example, may be understood on the basis of social exchange theory (Blau 1964). The motivational

processes of the theory incentivise workers who believe that committed organisations provide

education and training opportunities for the benefit of the worker to reciprocate by way of attitudinal

and behavioural commitments that are of benefit to the firm. Empirical support for such a process is

also shown by Georgellis and Lange (2007) for the German labour market.

Turning our attention to the first inter-temporal unemployment effect in the regression, the

experience of past unemployment – in line with the ‘scarring hypothesis’ – exhibits a strong and

negative impact on how employees rate their current job satisfaction. The result thus adds credence to

the assertion that, net of various socio-demographic characteristics, unemployment experienced in the

past makes an individual’s current subjective well-being less satisfying, even if the individual has

become re-employed in the meantime (Clark, Georgellis and Sanfey 2001).

In the second sequence of the regression approach, the ordered probit model is repeated with

the same socio-demographic background variables, but this time with both of the inter-temporal

predictor variables included: the experience of past unemployment and the perceived risk of future

unemployment. The inclusion of both variables will allow us to examine if the negative impact of

unemployment experienced in the past continues to hold once the perceived risk of future

unemployment has been controlled for. The respective results are shown in column (2) of Table 3.

A brief glance at the coefficients associated with the socio-demographic variables

demonstrates that controlling for the risk of future unemployment has not altered their effects on

employees’ job satisfaction in a substantial manner. Age, gender, marital status, health, educational

attainment, ongoing training, and income all still display statistical effects with the expected signs. In

terms of their statistical significance, gender and marital status remain statistically insignificant, and

the statistical impact of income has reduced marginally to a 5 per cent level of significance.

However, there is now strong evidence in support of the argument that the perceived risk of

future unemployment substantially reduces an employee’s job satisfaction. In absolute value terms,

the size of the different coefficients associated with future unemployment risk is noteworthy.

Compared with a negligible risk of future unemployment (‘not at all likely’), the job satisfaction of an

employee who perceives the risk of future unemployment to be ‘likely’ or ‘very likely’ falls

significantly below that of someone who has no concerns about being unemployed again in the future.

Compared with the latter, even someone who believes that the chance of future unemployment within

the next 12 months is ‘not very likely’ still displays lower job satisfaction ratings. Most interestingly,

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controlling for future unemployment risk relegates the impact of unemployment experienced in the

past to a still negative, but statistically insignificant coefficient, thus weakening the claims of the

‘scarring hypothesis’. It is entirely possible that the experience of past unemployment influences the

propensity to worry about the risk of future unemployment. However, net of several socio-

demographic variables, it is not unemployment experienced in the past, but the fear of future

unemployment, which accounts for the reduction in employees’ job satisfaction.

[Table 3 near here]

In the final sequence of the regression approach and in an attempt to control, at least partially,

for individual heterogeneity in a cross-sectional data environment, several proxies for different

personality traits are added to the ordered probit model. This is based on the presumption that

individuals who are predisposed to hold predominantly positive (negative) assumptions about their

world – in terms of both, external and self-evaluations - are more likely to report that they find their

jobs more (less) satisfying. Broadly consistent with the suggestions by Judge, Locke, Durham and

Kluger (1998), a number of these proxy variables have indeed a strong impact on an employee’s job

satisfaction. The final regression results are shown in column (3) of Table 3.

Whilst the frequency of feeling anxious as a measure for neuroticism, and thus as a negative

lens through which an individual’s environment is interpreted, exhibits a predictably negative impact

(e.g. Clark and Watson 1991), the effect is not statistically significant at the conventional levels.

However, all of the other personality traits display a statistically strong impact on employees’ job

satisfaction. It is clear that the way in which people see themselves strongly affects how they

experience their jobs. Specifically, the regression results highlight the strong and positive impact of

self-esteem, measured by the perception of the value of an individual’s activities in life and frequently

displayed as a strong association with and as an important source of positive affectivity (e.g. Wood,

Heimpel and Michela 2003). The result is also consistent with many previous findings on the strong

association between self-esteem and job satisfaction (e.g. Locke, McClear and Knight 1996). Whilst

previous work by Judge and his collaborators (e.g. Judge, Thoresen, Pucik and Welbourne 1999) has

collapsed self-esteem and generalised self-efficacy into a single-core self-evaluation construct to

predict managerial coping mechanisms and job satisfaction, there is also strong counter-evidence to

suggest that these constructs should be kept separate (Chen, Gully and Eden 2004). The latter

approach is followed in the present study. To this end, the regression results also report that job

satisfaction is strongly and positively related to the degree of freedom associated with how to live

one’s live, interpreted as a proxy for someone’s fundamental ability to exercise general control over

life events and thus cope with life’s exigencies. Similarly, locus of control, understood broadly in the

present study as the degree to which individuals believe that they control specific events in their lives,

exhibits a strong and positive effect. The effect of decision-making freedom at work, as the proxy

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variable, has been shown to meet employees’ ‘higher-order needs’ (e.g. self-expression, autonomy

and independence) and ultimately enhance job satisfaction (e.g. Gagné and Bhave 2011). By reference

to external core evaluations, the regression results emphasise the importance of interpersonal

trust/distrust and optimism/pessimism with regard to the future of the world. As the findings suggest,

those who believe that they live in a trusting world with a promising future ahead also rate the

satisfaction with their job more highly than those who hold opposite views. As such, it confirms the

assertion by Judge, Locke, Durham and Kluger (1998: 18) who contend that “people who consider

other people to be fundamentally untrustworthy or the world to be a dangerous place will view their

jobs in a much less benign way than those with the opposite premises”.

Personality traits thus clearly serve as powerful predictors of an employee’s job satisfaction.

However, whilst their overall influence is evident, their mitigating effect on other socio-demographic

control variables is limited to the impact of income, which is no longer statistically significant at the

conventional levels. Above all, the inclusion of personality traits in the regression model does not

alter the impact of past unemployment vs. future unemployment risk. The effect of unemployment

experienced in the past remains statistically insignificant, although it is interesting to note that the

coefficient is now positive.5 The perceived risk of becoming unemployed during the next 12 months

continues to exhibit a strong and negative influence on how satisfied employees are with their job.

It follows that it is the perceived risk of future unemployment, rather than the experience of

unemployment in the past, which serves as a key driver behind the reduction in employees’ job

satisfaction. What is more, the results hold true even when several socio-demographic characteristics

and proxies for individual personality traits are controlled for.

5. Concluding Remarks

For several decades both, the experience of past unemployment and the risk of future unemployment

have been associated with detrimental effects on individuals’ psychological well-being and workplace

behaviour. Although it is possible that both effects operate simultaneously, the analysis in this paper,

focused on employees’ job satisfaction and utilising a set of cross-sectional data derived from the

European Social Survey 2006-07, reports on a strongly pronounced insecurity effect: anticipated

unemployment substantially reduces employees’ job satisfaction. Interestingly, including the

perceived risk of future unemployment as a separate predictor variable in ordinal probit regressions

relegates the experience of past unemployment to a statistically insignificant coefficient and thus

weakens the ‘scarring’ hypothesis. Net of socio-demographic background variables and several

proxies for individual personality traits, it is not unemployment experienced in the past, but the fear of

future unemployment, which accounts for the reduction in employees’ job satisfaction.

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These findings have important implications for organisations and respective human resource

practitioners who are charged with minimising the detrimental impact on organisational performance.

This matters even more since it has been reported that the feeling of job insecurity may even arise in

environments that are objectively non-threatening (Rosenblatt and Ruvio 1996). Moreover, perceived

job insecurity develops expectations about an uncertain future, which may influence otherwise

affective responses to an employee’s work environment and generates requirements for assurances

and additional information. So note Laine et al (2009) that “the necessity of actively searching out

information in order to reduce uncertainty and to be able to control future possibilities places

additional demands on the employee, implying that social support is all the more important” (Laine,

van der Heijden, Wickström, Hasselhorn and Tackenberg 2009: 435). To this end, the present study

provides additional evidence in support of endeavours aimed at assisting those who believe that their

job may be under threat, including counselling, confidence-building exercises, workforce

consultations, advice on alternative employment opportunities within the firm, and informal support

from co-workers and supervisors. The latter activities should certainly be embraced, especially since

previous research has shown that support derived from others in the workplace environment can

contribute significantly in buffering individuals against job dissatisfaction and non-compliant job

behaviours when employees’ job security is at stake (e.g. Lim 1997).

Although the present study provides robust empirical evidence on the impact of experienced

and anticipated unemployment on employees’ job satisfaction, it is nevertheless important to bring

some data limitations to the reader’s attention. As mentioned earlier and without recapitulating at

length, the study is constrained by the absence of longitudinal data, which imposes design limitations

to following trends and changes over time. It follows that the analysis of cross-sectional data cannot

rely on fixed-effect estimations to control for time-invariant factors. Moreover, although several

personality traits have been controlled for, the variables used represent only broad proxies for these

traits, are thus admittedly imperfect and consist of single-item variables rather than multi-item

constructs. It is also noteworthy that self-reported data have been analysed, which have been shown to

suffer from several biases. These constraints need to be unreservedly acknowledged, but we can take

comfort from observations by Schimmack and Oishi (2005) who note that self-reported measures of

wellbeing possess adequate validity and reliability. Setting aside the vexed issue of self-reported data,

the more general issue of the use of single-item measures of complex attitude structures, such as job

satisfaction, remains a controversial one, as such measures tend to have only marginally acceptable

internal consistency. On a positive note, the meta-analysis of US data sets by Wanous, Reichert and

Hudy (1997) gives the use of single–item measures a cautious thumps-up. Rose (2005) raises similar

concerns on the use of single-item measures, but he also adopts a more pragmatic attitude towards the

use of such measures and proceeds with his analysis of employee despondency in the UK.

In terms of scope for future research and assuming the availability of detailed information, an

analysis of data sub-divided by different unemployment frequencies and different unemployment

14

spells, unavailable in the current data set, may provide useful insights. Replicating the study with

longitudinal data sets and multi-item personality constructs, or with different job satisfaction domains

and extending the analysis to include a larger set of countries or regions with more salient personal

trait variations would also provide interesting avenues for future scholarly endeavours. Finally, as

speculated by reference to the results reported in Table 2, it is conceivable that the observed effects of

past unemployment are transmitted through perceived job insecurity. Put differently, the perception of

future unemployment may represent an intervening variable in the relationship between past

unemployment and employees’ job satisfaction. In such a scenario, future unemployment would serve

as a mediator. This arguably deserves separate examinations, and in an extension of the present

assessment future studies may wish to formally explore this possibility.

Acknowledgement

The analysis in this study is based on unit record data, derived from the third wave of the European

Social Survey (ESS) and collected during the period 2006–07. The usual disclaimer applies.

Notes

1. On this occasion, the terms ‘job satisfaction’ and ‘happiness at work’ are used interchangeably.

This is merely an editorial simplification.

2. Data from the 2006-07 European Social Survey (ESS) were publicly released in April 2008. For a

description of the sampling design, see Lynn, Hader, Gable and Laaksonen (2004). For further

information, including questionnaire design details see www.europeansocialsurvey.org.

3. For a brief survey of this research, see Lucas (2007).

4. In the present study, full-time employees are defined as respondents in 30 hours or more of paid

employment per week for their main job.

5. Knabe and Rätzel (2011), using German longitudinal data to explore the impact of unemployment

on life satisfaction, uncover similar results when they control for individual heterogeneity.

Speculatively, they suggest that this may occur because finding a job after a long spell of

unemployment could be surprising and may have a particularly favourable impact on satisfaction

ratings.

15

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19

Table 1: Dispositional Variables

Dispositional Category Proxy Variables

Self-Esteem

‘I feel what I do in life is valuable’

Generalized Self-Efficacy

‘I am free to decide how to live my life’

Locus of Control

‘I feel that I am allowed to decide how daily work is organised’

Neuroticism

‘I felt anxious’ (how often past week?)

External Core Evaluations

- ‘Most people can be trusted’ vs. ‘can’t be too careful when trusting

people’

- ‘It is hard to be hopeful about the future of the world’

Note: The choice of dispositional categories is based on the ‘core evaluation’ concept by Judge,

Locke, Durham and Kluger (1998).

Table 2: Past Unemployment and Perceived Risk of Future Unemployment

Unemployment and work seeking (min. spell: 3 months)

during last 5 years

Perceived risk of becoming

unemployed in next 12 months

Yes

No

Very likely

12.7%

4%

Likely

20%

9.3%

Not very likely

41%

41%

Not at all likely

26.3%

45.6%

Observations 1412 1999

Source: Samples derived from ESS 2006-07; author’s own calculations.

20

Table 3: Job satisfaction – ordered probit regressions

(1)

Past unemployment only

(2)

Past unemployment & future unemployment risk

(3)

Inter-temporal unemployment & personality traits

Past Unemployment -.106*** (0.038) -.005 (0.039) .042 (0.040)

Future Unemployment Risk

- ‘Very likely’ - -.738*** (0.073) -.603*** (0.074)

- ‘Likely’ - -.575*** (0.058) -.464*** (0.060)

- ‘Not very likely’ - -.271*** (0.041) -.229*** (0.041)

Background Controls

Male -.029 (0.034) -0.025 (0.035) -.0.008 (0.035)

Age -.025** (0.012) -.029** (0.013) -.035*** (0.013)

Age2 .000*** (0.0002) .000*** (0.001) .000*** (0.001)

Married .017 (0.037) .018 (0.038) .016 (0.039)

Health .183*** (0.023) .162*** (0.024) .110*** (0.025)

Education

- ‘Middle’ -.044 (0.048) -.058 (0.049) -.092* (0.050)

- ‘Upper’ -.097** (0.053) -.127** (0.054) -.229*** (0.056)

Ongoing education/training opportunities past 12 months

.175*** (0.038) .143*** (0.038) .072** (0.039)

Household income

- ‘Middle’ .201*** (0.064) .136** (0.065) .086 (0.066)

- ‘Upper’ .268*** (0.075) .171** (0.076) .108 (0.077)

Personality Trait Proxies

‘I felt anxious’ (how often past week?)

- - -.005 (0.065)

‘I feel what I do in life is valuable’

- - .529*** (0.050)

‘I am free to decide how to live my life’

- - .186*** (0.044)

‘I feel I am allowed to decide how daily work is organised’

- - .057*** (0.006)

‘Most people can be trusted vs. can’t be too careful’

- - .039*** (0.009)

‘It is hard to be hopeful about the future of the world’

- - -.097*** (0.038)

Country dummies Yes Yes Yes

Observations 3,411 3,411 3,411

Log Likelihood 14779.763 14113.255 13479.895

Note: (***) = significant at the 1 percent level, (**) = significant at the 5 percent level, and (*) = significant at the 10 percent level; robust standard errors in parentheses. Reference categories: educational attainment (lower); household income (lower); future unemployment risk (not at all likely).

21

Appendix: Variable definitions and sample means

Variable Definition

Means

Job satisfaction Ordinal categorical variable on a scale 0 to 10 (0=extremely dissatisfied, 10=extremely satisfied) 6.82

Socio-demographic Background

Male Dummy variable: 1 for male; 0 otherwise 0.50

Age Age in years 40.87

Married Dummy variable: 1 for married; 0 otherwise 0.49

Education Ordinal categorical variable on a scale of 1 to 3 (1 = lower; 3 = upper) 2.07

Ongoing education/training opportunities in past 12 months Dummy variable: 1 for having opportunity in past 12 months; 0 otherwise 0.52

Income Ordinal categorical variable on a scale of 1 to 3 (1 = lower; 3 = upper) 2.05

Health Dummy variable: 1 for health self-rated as good or very good; 0 otherwise 0.74

Inter-temporal Unemployment

Past Unemployment Dummy variable: 1 if unemployed within past 5 years; 0 otherwise 0.41

Future Unemployment Risk Ordinal categorical variable on a scale of 1 to 4 (1 = not likely at all; 4 = very likely) 1.90

Personality Traits

‘Felt anxious’ (how often past week?) Dummy variable: 1 for ‘Most of the time’, or ‘All or almost all of the time’; 0 otherwise 0.09

‘Feel what I do in life is valuable’ Dummy variable: 1 for ‘Agree’ or ‘Strongly agree’; 0 otherwise 0.83

‘Free to decide how to live my life’ Dummy variable: 1 for ‘Agree’ or ‘Strongly agree’; 0 otherwise 0.78

‘It is hard to be hopeful about the future of the world’ Dummy variable: 1 for ‘Agree’ or ‘Strongly agree’; 0 otherwise 0.47

‘Allowed to decide how daily work is organised’ Ordinal categorical variable on a scale of 1 to 10 (1 = I have no influence; 10 = I have complete control) 6.23

‘Most people can be trusted vs. can’t be too careful’ Ordinal categorical variable on a scale of 0 to 10 (0 = can’t be too careful; 10 = most people can be trusted) 5.25

Observations

3,411