Europe / Are leaders aware of the miseries of mass unemployment?

Unemployment in Europe is at record levels and rising. Five European leaders (Dijsselbloem, Rehn, Asmussen, Regling and Hoyer) declared in The New York Times (April 17) that their current policies of austerity bring:

serious social challenges, notably in the form of unacceptably high unemployment. These challenges have to be addressed with determination.

But there is awfully little to find in their policies that is reassuring to those who suffer being unemployed, often for years in a row, or to the increasing number of employed who face the prospect of job loss. And the policies that the leaders bring forward as their response to the crisis, do not indicate a deep awareness of the disastrous psychological, social and economic consequences of unemployment. It seems that full employment, that used to be one of the main macro-economic policy goals, has completely disappeared behind the priorities of low inflation and balanced budgets. The latter are considered to be essential because of confidence effects. But what are the confidence effects of mass unemployment? Questions about psychological well-being are often included in general purpose household surveys, in particular the question “How satisfied are you at present with your life as a whole?” Winkelmann and Winkelmann (1998) used evidence from panel data to show that unemployment has a large detrimental effect on satisfaction after individual specific effects are controlled for. The effect of unemployment is large: almost three times larger than the effect of bad health. And it is unrelated to unemployment duration; the long-term unemployed do not get used to their situation.  These non-pecuniary costs by far exceed the pecuniary costs associated with loss of income while unemployed. This large decrease in satisfaction must have a significant impact on general optimism and confidence.

Chosen excerpts by Job Market Monitor

via Are European leaders aware of the miseries of mass unemployment? | Real-World Economics Review Blog.