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The logic behind motivational incentives

Understanding unemployment through well-being – why motivation-focussed activation policy may be misguided Good Lives and Decen t Societies Workshop 2 Dr. Jan Eichhorn (Jan.Eichhorn@ed.ac.uk). The logic behind motivational incentives. The rational decision making nexus.

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The logic behind motivational incentives

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  1. Understanding unemployment through well-being – why motivation-focussed activation policy may be misguided Good Lives and Decent Societies Workshop 2 Dr. Jan Eichhorn (Jan.Eichhorn@ed.ac.uk)

  2. The logic behind motivational incentives

  3. The rational decision making nexus Cost of unemployment Gain from employment

  4. The rational decision making nexus Unemployment benefits Gain from employment Cost of unemployment

  5. The rational decision making nexus Unemployment benefits Cost of unemployment Reduced incentive to seek employment

  6. Implication: Optimal choices Unemployment benefits Gain from employment Equivalent utility (subjective well-being) Cost of unemployment Those “choosing“ unemployment at this benefit level: Optimal choice

  7. The problem: assumptions about motivations • Well-being research as counter to traditional utility conceptions (as revealed preferences) [i] • Negative effects of individual unemployment [ii] • Decrease in life-satisfaction beyond income loss [iii] • Long-run scarring effects: limited adaptation [iv] i. Frey 2008, Bosco 2005, Di Tella & MacCulloch 2006; ii. Clark & Oswald 1994, Ouweneel 2002; iii. Winkelmann 2009, Diener & Biswas-Diener 2008; iv. Clark et al. 2001, Lucas et al. 2004

  8. Public views Views on unemployment benefits

  9. Benefits impact in EU comparison

  10. The effect of unemployment across the EU European Values Study 2008 (Eichhorn 2013, Social Indicators Research)

  11. The effect of unemployment across the EU

  12. Those “needing” motivational activation in the UK

  13. Subjective well-being by economic activity (UK) 8 UK Annual Population Survey 2012

  14. Subjective well-being by economic activity (UK) 8 UK Annual Population Survey 2012

  15. Subjective well-being by economic activity (UK) 8 Economically unemployed/inactive (non-retired, non-students) UK Annual Population Survey 2012

  16. Subjective well-being by economic activity (UK) Economically unemployed/inactive (non-retired, non-students, non-domestic, non-sick/disabled) UK Annual Population Survey 2012

  17. Subjective well-being by economic activity (UK) Economically unemployed/inactive (non-retired, non-students, non-domestic, non-sick/disabled) The group satisfied (accommodated) in an economically inactive state UK Annual Population Survey 2012

  18. Subjective well-being by economic activity (UK) Economically unemployed/inactive (non-retired, non-students, non-domestic, non-sick/disabled) The group satisfied (accommodated) in an economically inactive state Proportion claiming benefits: 36%  2.5% of those unemployed/inactive (“able“) face the utility satisfaction problem UK Annual Population Survey 2012

  19. Subjective well-being by economic activity (UK) A good starting point for a generally applicable policy? UK Annual Population Survey 2012

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