Self-reported Satisfaction and the Economic Crisis of 2007-09: How People in the UK and Germany Perceive a Severe Cyclical Downturn

Antje Mertens, Miriam Beblo

Research output: Working paper

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Self-reported satisfaction measures respond to a great variety of socio-demographic characteristics as well as the job and living environment. In this paper we ask whether the recent financial market crisis has caused a deterioration of satisfaction not only for the unemployed but also for those out of the labour force and especially those in employment. The focus of our analyses is on the pattern of life, job and health satisfaction over time and the influence of unemployment rates, inflation rates and GDP growth. We compare the UK and Germany, two countries with different employment protection regulations and different consequences of the crisis for the labour market. For our analysis we use data from the German Socio-Economic Panel (SOEP) and the British Household Panel Study (BHPS) for the period 1996 to 2009 and supplement this with annual information on macroeconomic indicators. We estimate Ordered Logit models, controlling for clustered standard errors. Sensitivity analyses with fixed and random effects yield qualitatively similar results. We were somewhat surprised to find significant differences between the formerly separated parts of
Germany even twenty years after re-unification. While people living in the western part of Germany report somewhat lower satisfaction in 2009 compared to the previous years, those living in the eastern part report higher levels than in 2006, the year before the financial crisis started. This could be due to the largely different employment structures in both parts of Germany. As exports and not
so much services were hit by the crisis, western German federal states were facing stronger negative demand pressures. Our findings for the UK are similar to the East German evidence, as year dummies for the crisis years 2007 and 2008 do not show any sign of a decrease. Looking at the impact of
macroeconomic indicators such as GDP growth, inflation and unemployment, we find diverse effects for Germany and the UK. Positive reactions to an increase in GDP are observed in West Germany only. The strongest and most robust result across all subsamples has yet been found for the relationship between self-reported satisfaction (regarding all aspects, life, job and health) and the
regional unemployment rate: The higher regional unemployment the more satisfied people seem to be irrespective their current labour market status. Not only unemployed workers feel better when unemployment rises – a potential result of changing social norms in times of rising unemployment – but also employed workers who seem to be more satisfied with their lives and jobs when
unemployment is rising around them. At the same time, the overall level of unemployment has a significantly negative effect, though for Germans only and, when it comes to employees, even for East Germans only. Interestingly, we get similar results when looking at job and health satisfaction. All aspects of self-reported satisfaction are related to the business cycle. Hence, the costs of the
financial and economic crisis have not been limited to the well-documented fall in the domestic products but comprise lower satisfaction with life in general as well as job and health in particular. These hidden costs concern West Germans in particular.
Original languageEnglish
PublisherUniversity of Aberdeen, Centre for European Labour Market Research
Number of pages33
Publication statusPublished - Aug 2011


  • happiness
  • life satisfaction
  • subjective well-being
  • business cycles
  • crisis


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