The Impact of Extended Unemployment on Subjective Well-Being among Youth: Mediating Effects of Earnings, Social Capital, and Depression

Abstract

This study examines how extended unemployment affects the well-being of youth, considering the mediating factors of earnings, social capital, and depression. Using data from the 2022 Youth Life Survey, we found the following. First, extended unemployment, defined as the sum of the time- related additional employment, official unemployment, and potential labor force, negatively affects subjective well-being through reduced earnings. Second, extended unemployment diminishes social capital, which in turn negatively affects subjective well-being. Third, extended unemployment increases depression among young adults, which negatively affects subjective well-being. Fourth, the magnitude of the indirect effects of extended unemployment was at its smallest when mediated by earnings and at its greatest when mediated by depression, implying that the effects of extended unemployment are more social and psychological than economic. Fifth, the effects of extended unemployment in terms of average treatment effects on subjective well-being depend on the ordinal ranking of extended unemployment that was categorized from formal employment to potential labor force. We also found that the total effect of extended unemployment decreases in the following order: formal employment, informal employment, time-related additional employment, formal unemployment, and potential labor force. This study provides a new perspective on unemployment research by utilizing the construct of extended unemployment that ranks the degree or intensity of employment into five categories and compares the effects of the differences between the degrees of employment.