New evidence on subjective wellbeing and the definition of unemployment in South Africa

Abstract

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.