Job satisfaction, insecurity and the Great Recession: The effect of others' unemployment

Job security may be considered the most important working condition during an economic recession. In this paper we use a very rich repeated cross-section dataset on workers' job conditions, together with regional unemployment information at the activity level, to test whether employees value job security differently after the recent economic downturn. We use subjective-wellbeing measures of perceived and actual job insecurity in our assessments. We find that peers' unemployment affected job satisfaction negatively before the recession, but not afterwards. The economic valuation of job insecurity increased after the financial crisis when measured subjectively. Objective measures related to the industry's unemployment rates decreased. Our main conclusions are robust to sample selection and method of computation. This suggests that increased job insecurity constitutes an important welfare loss associated with increased unemployment during recessions.