Working Paper

2015-05-28

University of Cape Town

Access to new nationally-representative, individual-level panel data from South Africa has allowed for the revalidation of Kingdon and Knight’s (2006) discussion on the definition of unemployment. This paper investigates subjective wellbeing as a measure of comparison between labour market statuses. It finds that on the grounds of subjective wellbeing the non-searching unemployed (or 'discouraged') are significantly worse-off than the not-economically-active. Moreover, evidence suggests that with regard to the relationship between life satisfaction and labour market status, the 'discouraged' have 'hit rock bottom'. This paper therefore advocates for the inclusion of the non-searching unemployed in the labour force and the use of a broad definition of unemployment, on the grounds that rational individuals would not self select into a lower state of wellbeing.

Neil Lloyd acknowledges the fi nancial support of the National Research Foundation and the National Income Dynamics Study. Murray Leibbrandt acknowledges the Research Chairs Initiative of the Department of Science and Technology and National Research Foundation for funding his work as the Research Chair in Poverty and Inequality