Abstract/Summary

Previous research shows that unemployment has lasting detrimental effects on individuals’ subjective well-being. However, the issue of how well-being evolves after individuals switch back into the labour force has received little theoretical and empirical attention. This study examines the extent to which reemployment restores individuals’ subjective well-being following a period of unemployment. Applying fixed effects models to the large-scale longitudinal data from the British Household Panel Survey, we find that recovery of subjective well-being upon reemployment is fast, complete and enduring, even when individuals take less favourable employment options to return to work. By contrast, transitions into economic inactivity following unemployment are accompanied by persistent scars on subsequent well-being trajectories. This study advances our understanding of well-being development over the entire employment-unemployment-reemployment cycle.