Measuring satisfaction of the unemployed: a composite indicator and policy implications

Given that unemployment is one of the main economic problems, policymakers debate the possible solutions. We contribute to this debate by analysing the general satisfaction of the unemployed in Spain and comparing it with that of the employed. To this end, we create a composite indicator of general satisfaction using responses in the European Community Household Panel (ECHP) (1994-2001) relating to specific satisfaction in different areas, work, financial, home and leisure time. We find that being unemployed has a significant and negative association with the general satisfaction of individuals and, in consequence, we conclude that the Spanish unemployment problem cannot be attributed, at least not entirely, to a lack of incentives for seeking work.