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The Psychological Impact of Unemployment and Joblessness*

ARTHUR H. GOLDSMITH* Washington

and Lee University

JONATHAN

R. VEUM

U.S. Bureau of Labor Statistics

WILLIAM University

of North

DARITY, JR. Carolina at Chapel Hill

ABSTRACT: Economists have identified two principal adverse effects of unemployment. One is the output foregone that could have been produced if unemployed workers had been productively employed. The second is the psychological damage suffered by unemployed workers and their families. Psychologists have offered theories to explain how experiences such as joblessness may lead to a deterioration in mental health. They also have designed and validated survey instruments capable of measuring various aspects of emotional health. Unfortunately, their efforts to document the psychological impact of unemployment have been plagued by data limitations, while economists largely have ignored this task. The purpose of this study is three-fold. First, we discuss why unemployment and joblessness are likely to influence an individual’s perception of personal efficacy, locus of control, and hence psychological well-being. Second, we discuss and critique existing efforts to examine the relationship between labor force experiences and locus of control. Third, we investigate the relationship between joblessness and its component parts-unemployment and dropping out of the labor forceon personal locus of control, using observations from the NLSY and an alternative methodological framework. The NLSY is a longitudinal data set that contains detailed information on the personal characteristics of individuals in the sample, their labor force experiences and a specific personal locus of control. In discussing the results we also attempt to shed some new light on the debate between Clark and Summers (1979)

*Direct all correspondence to: Arthur H. Goldsmith, Department of Economics, Washington and Lee University, Lexington,

Virginia 24450

Journal of Socio-Economics, Volume 25, No. 3, pp. 333-358 Copyright 0 JAI Press, Inc. All rights of reproduction in any form reserved. ISSN: 105k5357

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and Flinn and Heckman (1982, 1983) over the question of whether being out of the labor force and being unemployed should be thought of as distinct states. We add further insight into this issue by examining whether there are psychological differences, as measured by locus of control, between otherwise comparable members of these two groups. Finally, we reconsider the Ellwood and Ruhm exchange over whether joblessness and unemployment lead to “psychological” scarring. We find that labor force experiences fail to influence personal locus of control for male youths. There is evidence, however, that perception of personal efficacy is altered by joblessness among young women. As the duration of a current unemployment spell lengthens, the likelihood of holding beliefs of personal efficacy decline for young women. There is also some evidence of scarring among women. For females who in the past have spent time both unemployed and out of the labor force, the greater the duration of their joblessness the more likely is a reduction in feelings of personal efficacy and more aggravated one’s self-perception of helplessness. We also offer psychological evidence on the relative emotional well-being of the unemployed and labor force drop outs that largely supports the position of Clark and Summers that these conditions are largely indistinguishable.

INTRODUCTION Economists have identified two principal adverse effects of unemployment. One is the output foregone that could have been produced if unemployed workers had been productively employed. The second is the psychological damage suffered by unemployed workers and their families. An extensive body of literature exists that examines the monetary costs of unemployment borne by society and the individuals unemployed in the form of lost output, and hence income. For instance, the late Arthur Okun (1970) estimated that for each percentage point by which the unemployment rate is above the natural rate, real GNP is 3% below the potential GNP.’ Of course, greater unemployment leads to heavier societal burdens in the form of lower tax revenue and increased government expenditures on unemployment insurance and social programs.2 Behind aggregate measures of lost output are the lost earnings and opportunities for skill development experienced by the unemployed. In addition, according to Ellwood (1982) it is possible that exposure to unemployment may “scar” an individual harming their subsequent labor market outcomes. However, Ruhm (1991) reports little evidence of monetary scarring in the form of lower wages or less annual weeks of employment, among older workers who were displaced from their job five years earlier.3 Psychologists have offered theories to explain how experiences such as joblessness may lead to a deterioration in mental health. They also have designed and validated survey instruments capable of measuring various aspects of emotional health.4 Unfortunately, their efforts to document the psychological impact of unemployment have been plagued by data limitations, while economists largely have ignored this task.5 Many of the empirical studies conducted by psychologists have relied upon longitudinal data sets, but those data sets lacked detailed information about pro-

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du~tivity-linked characteristics of the unemployed and lacked detailed information about their work and nonwork experience.6 Studies using such data sets have led to a tradition of testing for the psychological impact of unemplo~ent by investigating mean differences in measures of emotional well-being between groups of currently employed and unemployed individuals.7 Individual differences in a host of factors including the duration of the components of joblessness, unemployment and time out of the labor force, both past and present, are likely to influence psychological well-being. But dropping out of the labor force and the extent of prior labor force experiences have been ignored in these studies. Neglect of these and other personal differences, such as family characteristics, may lead to biased estimates of the relation between ~employment and emotional well-being. Indeed, s~~~singly, psychologists also generally have failed to utilize the National Longitudinal Survey of Youth (NLSY) to examine the relation between labor force experience and emotional well-being. The NLSY is a longitudinal data set that does contain detailed information on the personal characteristics of individuals in the sample, their labor force experiences and a specific com~nent of emotional well-being, personal locus of control. The purpose of this study is three-fold. First, we discuss why unemployment and joblessness are likely to influence an individuals perception of personal efficacy, locus of control, and hence psychological well-being. Second, we discuss and critique existing efforts to examine the relationship between labor force experiences and locus of control. Third, we investigate the relationship between joblessness and its component pus-unemployment and dropping out of the labor force-on personal locus of control, using observations from the NLSY and an alternative methodological framework. In discussing the results we also attempt to shed some new light on the debate between Clark and Summers (1979) and Flinn and Heckman (1982, 1983) over the question of whether being out of the labor force and being unemployed should be nought of as distinct states. We add further insight into this issue by examining whether there are psychological differences, as measured by locus of control, between otherwise comparable members of these two groups. Finally, we reconsider the Ellwood and Ruhm exchange over whether joblessness and unemployment lead to ‘~psychologica~’ scarring. We find that labor force experiences fail to influence personal locus of control for male youths. There is evidence, however, that perception of personal efficacy is altered by joblessness among young women. As the duration of a current unemployment spell lengthens, the likelihood of holding beliefs of personal efficacy decline for young women. There is also some evidence of scarring among women. For females who in the past have spent time both unemployed and out of the labor force, the greater the duration of their joblessness the more likely is a reduction in feelings of personal efficacy and more aggravated one’s self-perception of helplessness. We also offer

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psychological evidence on the relative emotional well-being of the unemployed and labor force drop outs that largely supports the position of Clark and Summers. WHY ARE THERE NEGATIVE PSYCHOLOGICAL EFFECTS OF UNEMPLOYMENT? Unemployment and Helplessness Why might unemployment have an adverse effect on emotional well-being? Seligman and Maier (1967) believe that experiences perceived as uncontrollable leave an individual with a sense of “helplessness.“’ The “helpless” person believes that their current situation, and most likely their future status, will not be affected significantly by any decisions or actions that they take themselves. The helpless perceive that they are not in control of events that affect their lives. Moreover, this perception persists in spite of the fact that the conditions responsible for their feelings of helplessness may have changed substantially. According to Seligman (1975) this type of perception reduces the motivation to initiate voluntary responses likely to control or reverse the undesirable outcome.9 Brehm (1966), on the other hand, argues that an individual’s response to a loss of control is likely to be one of “reactance,” not helplessness. Reactant individuals apply themselves in an effort to re-establish control. In subsequent collaborative work Brehm (Wortman and Brehm, 1975) synthesized the theories of reactance and helplessness. He argued that reactance occurs early, following exposure to an uncontrollable event, and that learned helplessness emerges as exposure lengthens. Do the unemployed conceptualize their situation as out of their control? Does exposure to unemployment foster feelings of helplessness? If so, a link may exist between labor market experiences-such as unemployment-and psychological well-being. Moreover, damaged psychological health may affect an individual’s subsequent work performance and job-seeking behavior. Is it appropriate to consider unemployment as an event perceived as uncontrolbut lable by its victims ? Layoffs clearly result in involuntary unemployment, individuals who are unemployed after having quit their job typically are considered by the investigator to be voluntarily unemployed. Kniesner and Goldsmith (1987) find that the share of U.S. unemployment attributed to quitting is quite small, averaging 14% in a typical post 1947 full employment year and 8% during years characterized by recession. What matters is how the unemployed perceive themselves. Indeed, in some cases the quitters’ justifiable initial perception is that they are responsible for their exposure to unemployment.” However, after a prolonged period of search the exposed individual is likely to view events from a particular date forward as involuntary, regardless of how an investigator has classified the initial cause of their experience. In a well-known article in the field of psychology, Robert White (1959) set forth the proposition that one of the prime motives of human beings is to control

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their own environment. Heider (1958) suggested that individuals attribute to either self or situation the events shaping their current environment.’ ’ Kelly (1967) extended the Heider’s work by presenting a theory of how people select their attributional philosophy from amongst the two categories identified by Heider. Kelly believes that in an effort to assign cause, people defucto behave like scientists, examining the covariance between behavior and outcome (e.g., cause and effect). According to Kelly (1967) the attributor’s latent goal in gaining sufficient knowledge to assign cause is that of “... effective management of himself and his environment.” Understanding why events occur should help individuals manage their behavior and adapt to enhance the likelihood of desirable outcomes. Activities leading to self attribution reinforce a powerful feature of personality that should be sustained. However, an environment that repeatedly fails to appear to respond to individual action will frustrate the drive to exercise control. Does this deprivation have a detrimental effect on subsequent attitudes, behavior and outcomes? Is Seligman correct in asserting that such an environment fosters helplessness? Psychological

Health

and Perception

of Personal Efficacy

One of the founders of social learning theory, J.B. Rotter, was interested in the impact on behavior of an individual’s perception of control over events. In order to conduct these inquiries Rotter (1966) developed a survey instrument that measures an individual’s “locus of control.“12 For Rotter, intemalizers are individuals who believe they are masters of their own fates and hence bear personal responsibility for what happens to them. They see control of their lives as coming from within themselves. On the other hand, many people believe that they are simply pawns of fate, that they are creatures controlled by outside forces over which they have little if any influence. Such people feel that their locus of personal control is external rather than internal and that they bear little or no responsibility for what happens to them. Rotter refers to the latter group as externalizers. Rotter measures an individual’s degree of externality by the magnitude of their composite score on a twenty-three question survey instrument. Each of the twenty three items consists of a pair of alternatives, one of which represents external beliefs, the other internal. The individual is asked to select the one statement of each pair which is more strongly believed to be the case. Rotter maintains that beliefs about locus of control are quite stable, general in their application and have a major effect on what people do and feel. A number of studies (Duke & Lancaster, 1976; Johnson & Kilmann, 1975; Hetherington, 1972; Davis & Phares, 1969; Katkovsky, Crandall & Good, 1967) suggest that beliefs about locus of control are established early in life. Different childhood experiences presumably lead to different expectations about the extent to which people can control their own destiny. These expectations eventually harden and

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determine how the person will later try to respond and cope with new situations and developments. Thus, personal locus of control is a type of personality trait. Although personality traits are stable, they are not invariant. New developments can alter an individual’s disposition. However, the variation is likely to be temporary unless the catalyst is sufficiently large or persistent. What types of experiences are vivid and salient enough to alter an individual’s personal locus of control?13 Seligman (1975) suggested that confronting uncontrollable events leads to a sense of helplessness and loss of control. If unemployment is perceived as an uncontrollable event, is it capable of altering a person’s control locus either temporary or permanently? Unemployment,

Helplessness

The Sequential

and Control:

Impact Hypothesis

Based on case studies of the unemployed, Harrison (1976) and Hill (1977) hypothesized that unemployment has a sequential effect on personal locus of control.14 They believe that the shock associated with the realization of unemployment, particularly for those displaced, may soon be replaced by optimism. During this early optimistic stage individuals regard themselves as temporarily out of work, they believe they will find another job soon. At this stage the unemployed actually may feel more in control, since they are relieved of the regimen and duties associated with work. Rejection of initial attempts to secure work signal the end of the euphoria and optimism. Now the unemployed person enters an intermediary phase where he or she begins to become psychologically debilitated. Unemployed persons report being “insufficiently stimulated.” Their motivation to search and return to work goes into decline. Pessimism sets in. Finally, after months of unsuccessful search they acknowledge their sense of futility and, according to Hill (1977, pp 26) the long term unemployed enter a final stage and “settle down to unemployment.” Thus, a sense of personal powerlessness, leading to loss of a feeling of control, can be expected to build throughout the intermediate phase and harden during the final or “settling in” stage.15 Individuals can be expected to become more external during these stages as their unemployment is increasingly viewed as an event beyond their control. This in turn deepens their sense of helplessness.16 LITERATURE REVIEW: LOCUS OF CONTROL AND LABOR FORCE STATUS Methodology

Because there may be a lag between exposure to unemployment and its subsequent impact on locus of control, longitudinal data are desirable to investigate this relationship. Social psychologists have constructed a number of longitudinal data

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sets with information on various measures of emotional well-being and labor force experience. l7 The data contain detailed information on some individual specific personal characteristics such as age and gender. Nevertheless, a tradition has developed in the literature of analyzing variations in group data rather than in& vidual data. The conventional methodology adopted by psychologists to examine the relation between labor force experiences and locus of control is a non-equivalent control group design in which respondents are not randomly allocated to treatments. Using this framework, individuals are interviewed, and locus of control is measured at some baseline date. A follow-up interview is conducted to obtain an additional measures of locus of control. Labor force status at the time is noted also. Individuals are then classified by alternative labor force statuses, such as employed, unemployed and attending school. Current mean locus of control is calculated for each of these groups. In addition, mean locus is constructed for each group when the members of the current group were at the baseline. F tests are constructed to test the null hypothesis that there are: 1.

No intergroup differences in locus at the baseline;

2.

No

3.

No intragroup differences in locus between the baseline and follow-up periods.

intergroup differences in locus at the point of follow-up; and

The Stylized

Facts

Tiggemann and Winefield (1984), Winefield and Tiggemann (1985), Winefield, Tiggeman and Goldney (1988), and Winefield, Winefield, Tiggeman and Goldney (199 1) have used longitudinal data on approximately 3,000 youths from Adelaide, Australia to examine labor force status and locus of control. These studies share a common baseline, the final year of high school beginning in 1980, differing only in the date of follow-up (1981, 1982, 1984,and 1988 respectively) and the types of categories for current labor force status (e.g., satisfied employed and unsatisfied employed rather than simply employed). The results of these four studies are generally comparable: no mean intergroup differences in locus of control at the baseline, all groups become more internal over time, and at follow-up the unemployed are significantly less internal, more external, than the employed. ’ * The conclusion reached by these authors is that any difference in locus between the employed and the unemployed is due to larger increases in internalization on the part of the former, rather than decreases in the latter. Gurney (1980) reaches the same conclusion after examining longitudinal data on recent high school graduates in metropolitan Melbourne using the traditional methodology. He also finds that employed youths are more internal than they

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were as high school seniors. However, he finds no difference in locus over time for the group composed of unemployed persons at follow-up. In contrast to these results are the findings of Patton and Noller (1984) based on a small longitudinal data set composed of high school graduates in Australia. At the baseline they find no intergroup differences in locus. However, they report that at follow-up, relative to the baseline, the unemployed are significantly more external while the employed are significantly more internal as expected.” Similar results based on the National Longitudinal Survey of Older Men were reported by Parnes and Ring (1977). They report no significant intergroup differences in mean personal locus of control scores prior to job loss. Two years later, individuals who were employed consistently become more internal, while those subsequently exposed to unemployment were significantly less internal than they had been. Further, support for the hypothesis that unemployment leads to a more external locus may be gleaned from a study by Baum, Fleming and Reddy (1986). They interviewed a small sample of employed and unemployed every few weeks regarding their attribution about their likelihood of finding work. The unemployed perceived that ability mattered less in terms of their prospects for finding work as their spell lengthened. Thus, the longer the duration of unemployment people tended to be less internal. Evaluation

of the Existing Literature

But the conventional framework of analysis may not be well-suited for analyzing the relation between labor force experience and locus of control on a host of accounts: First, it is difficult to isolate the effects of work and joblessness on psychological health if the comparison groups are derived by relying solely on current labor force status. The problem is that members of each group may have experienced some, possibly similar amounts, of the other group’s labor force status in the past. Thus, the analysis may lead to a comparison of groups of individuals whose labor force experiences are alike. For instance, consider a labor force composed of two individuals who provide an investigator with baseline information and are resurveyed at the end of 20 weeks. Suppose the first person spent the initial 18 weeks unemployed, worked one week, and is unemployed during the 20th and most recent week of the analysis period. Now consider a second individual over the same time span. Suppose this individual spent the first week following the baseline interview out of work, then found employment for a week, and currently is in their 18 consecutive week of unemployment. Both of these individuals may harbor feelings of helplessness and hold external beliefs due to having spent 19 of the past 20 weeks unemployed. However at the resurvey date, when the investigator assigns each individual to a labor force status group based on their current situation, the first will be placed in the unemployed


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group while the second is allotted to the employed group. These data might lead a researcher to infer, erroneously, that perception of personal efficacy is independent of labor force history since the members of both groups hold analogous, external, views about control. A second, and related concern is the failure of the conventional methodology to take full advantage of the longitudinal nature of the data available. Harrison (1976) and Hill (1977) have pointed out that unemployment appears to have a sequential effect on personal locus of control. Their case studies reveal that the impact of unemployment on locus of control is likely to depend on the duration of both current and prior exposure to unemployment. Unfortunately, most existing studies [Tiggemann and Winefield (1984), Winefield and Tiggemann (1985), Winefield, Tiggeman and Goldney (1988), Gurney (1980), and Parnes and King (1977)] examine the relation between unemployment exposure and locus of control and do not account for the extent of or the chronological context of the experience. Patton and Noller (1984) and Winefield, Winefield, Tiggeman and Goldney (1991) attempt to investigate whether locus of control is influenced by the duration of current unemployment. In both studies, no significant correlation was found. However, this finding may be misleading. Consider the labor force profile of the two individuals discussed above. Current unemployment was short, 1 week, for the first individual and long, 18 weeks, for the second. Yet both were extemalizers. Hence, no significant correlation would appear to exist between contemporaneous unemployment duration and sense of personal efficacy. However, the first individual had recently completed a spell of unemployment that lasted 18 of the previous 19 weeks. It is possible that this experience caused feeling of helplessness and a predisposition toward externalization, not the current week of unemployment. If this were the case, external locus of control would be related directly to the duration of both current and past unemployment. Therefore, to determine if locus of control varies with labor force experience, it is necessary to account for both current and completed bouts of unemployment.*’ A third methodological concern is the treatment of labor force drop outs. The conventional protocol is to eliminate individuals who are out of the labor force when the post base line survey is administered from the sample. For instance, Winefield, Tiggemann and Goldney (1988, p. 15 1) state that “Only those who had entered the work force and could be classified as either employed or unemployed were studied.” Winefield et. al (1991, p.425) explicitly justify this procedure by arguing that, “ .. . there was little difference between the dropouts from the various groups in either background and demographic characteristics or pretest scores on the dependent measures.” The implicit assumption is that the emotional response to unemployment, in terms of locus of control. is the same for individuals who continue to search and

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for individuals who take a respite by exiting the labor force. However, it is possible that those unemployed whose psychological well-being is most adversely affected are the persons most likely to exit the labor force. Clark and Summers (1979), using data from the Current Population Survey reported that there is a high rate of transition between unemployment status and out of the labor force status.21 But Flinn and Heckman (1983), using data from the National Longitudinal Survey of Young Men found that the probability of moving from unemployment to employment is significantly greater than the probability of moving from out of the labor force into employment.22 They interpreted this as evidence that the unemployed are searching more intensively than those out of the labor force. Their finding is consistent with the view that labor force drop outs would display greater helplessness, and hence would be more external, than comparable unemployed persons. They reject the hypothesis that unemployed and out of the labor force are behaviorally meaningless distinctions. Since many unemployed persons opt to cease seeking work altogether, excluding drop outs may give an inaccurate reading (picture) of the psychological consequences of exposure to unemployment. Finally, existing studies fail to account for the full range of individual differences that may influence locus of control. Gender, age, ability and quality of employment experiences typically are controlled for by stratifying the data. However, whether or not unemployment produces helplessness, leading to a more external locus, is likely to depend on other factors that influence personality development. For instance, early adolescent home environment and parent characteristics, marital status, and presence or absence of children may influence current locus of control directly, as well as an individual’s psychological response to joblessness. AN ALTERNATIVE

FRAMEWORK

OF ANALYSIS

In this section we discuss both an alternative data set and methodological framework for investigating the relation between labor force experience and locus of control. This approach, in conjunction with the data, directly addresses all of the identified shortcomings of the existing conventional methodology. The data used in this study are from the National Longitudinal Survey of Youth (NLSY). The NLSY is a sample of 12,686 males and females who were between the ages of 14 and 22 in 1979 and who have been interviewed annually since 1979. Along with providing detailed information on the labor market and demographic backgrounds of respondents in the first year, 1979, individuals were asked questions about locus of control. A key feature of this survey is that it collects information in an event history format. By recording the dates of all jobs and all periods of nonwork, the survey provides a virtually complete and continuous employment history for each individual in the sample.


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Since the work history information in the NLSY begins as of January 1, 1978, it is possible to analyze the impact of labor market experiences on locus of control from this date until the 1979 interview date. However, due to the age range of the sample respondents, some complications arise due to the involvement of many respondents in school to work transitions. For instance, it is unclear how to characterize joblessness following school completion but prior to securing a job. Is this time spent in earnest search which, if unsuccessful, may lead to adverse psychological effects? Similarly, after a period of work, joblessness following a decision to pursue further education but prior to enrollment, may not be accompanied by vigilant search. Therefore, the labor force experience data used in our study begin once employment is attained in 1978 and end early in 1979 at the time of collection of the locus of control information. In addition, the analysis is restricted to high school graduates who obtained at least one job over the time period (January 1, 1978-January 1979) and did not pursue advanced schooling prior to the spring of 1980. The resulting net sample is a group of 1,457 young individuals who presumably have ‘permanently’ left school and have some work experience. Young people, particularly recent school leavers, are an interesting group to focus on when investigating the psychological consequences of exposure to joblessness or unemployment for three reasons. First, adolescence is an important time for establishing independence and a sense of personal identity. For the school leaver, finding a job can represent an important stage in his/her more general development toward establishment of adult identity.23 Second, the early labor force years represent an important period for acquisition of schooling and work experience. If exposure to joblessness leads to an external attributional style, then youths may be less inclined to seek formal education and on-the-job training. Third, according to Blank and Card (1990), the share of total unemployment that is accounted for by youths aged 16-24 is quite large, ranging from 46% in 1977 to 36% in 1987. In order to estimate the relationship between locus of control and individual employment history an ordered probit model is used. Ordered probit models are appropriate when the dependent variable is categorical and sequential and when it is assumed that the errors are normally distributed (Maddala, 1983). The ordered probit model is essentially an extension of the two-outcome probit model, and the coefficients are interpreted like those in a regular probit: the probability of being in a higher (lower) category is associated with positive (negative) estimates. Unlike the two-outcome probit, the ordered probit model estimates the probability of a particular outcome falling within a set of ranges; it does not produce a unique constant term. Only four of Rotter’s twenty three questions were included in the NLSY. These four items were chosen by the designers of the NLSY based on evidence, provided by psychologists, which indicates that these measures, from the set of

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twenty three, are the strongest indicators of inte~ality-exte~ality.z4 However, precedent exists in the literature for the measurement of locus of control with a subset of Rotter’s twenty three questions.25 Following Rotter, the four questions were combined to form a measure of perceived personal locus of control.26 We refer to this measure, that may range in value from 0 (an external response to each question) to 4 (an internal response to each question), as an “Abbreviated Rotter.” Following methods similar to those developed by Heckman and Borjas (1980) and Flinn and Heckman (1982, 1983), who examine the “scarring effects” of nonemployment among young workers, joblessness is divided into separate components relating to current and past states of employment. Locus of control may be a function of whether an individual was jobless at the time of the interview, as well as the length of time the individual has spent in current joblessness. Previous spells of nonwork and the duration of these spells also may influence current perception of personal efficacy. This framework allows us to examine if the effects of joblessness on psychological health persist, possibly leaving scars. To examine whether exposure to unemployment and time spent out of the labor force are distinct states characterized by different effects on an aspect of emotional health-personal locus of control-periods of joblessness are classified as bouts of unemployment or time out of the labor force. We evaluate the relative impact of both current and past nonwork experiences. This sheds light on the appropriateness of eliminating those who exit the labor force from the data set. ~dividuals who have completed spells of joblessness in the past may have experienced both time out of the labor force (OLF) and unemployment. To isolate or capture the “pure” effect of unemployment and time OLF on locus of control it is necessary to partition the sample into three groups: those individuals who experienced only unemployment, those who experienced only time OLF, and a hybrid group composed of those who experienced both unemployment and OLF. Then, the pure impact of prior unemployment and OLF can be compared, in terms of incidence and duration, to determine whether the effects are analogous. Individuals in the initial stages of joblessness may be experiencing shock, leading to fear and helplessness, or hold an optimistic perspective on current and future outcomes. Hence, the impact of current labor force status (CUNI, COLFI) on locus is ambiguous, and we conduct two tailed hypothesis tests. As the length of time spent in a current spell of joblessness increases (CUND, COLFD), the likelihood of moving out of the optimistic stage and into a stage characterized by helplessness and external locus of control is expected to increase. Having completed a spell of joblessness during 1978 (PUNI, POLFI, PNOI) is expected to foster externality. For these in~vidu~s, the greater the proportion of time spent jobless (PUND, POLFD, PNOD), ceteris paribus, the more likely they will feel helpless, and hence the less likely they are to be an intemalizer. In the ordered probit equation estimated, explicit measures of each of these different forms of “state dependence” are used as explanatory variables.

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A youth’s early adolescent family environment, including extent and form of parental attention and inculcation, are expected to influence the formation of locus of control as a trait. The NLSY provides information on a number of family characteristics applicable to each youth surveyed at age 14 that contribute to the origin of personality trait 10cus.~~ We do this by accounting for whether both parents are present in the household (TWOPAR), if reading materials are available (READING), if the family is affiliated with a religious organization (RELIGION), if the parents are highly educated (PAREDUC), and if a parent held a professional position (PROPPAR). Personal characteristics, besides family and parental background, may also influence locus of control. If discrimination weakens the link between quality of effort and quality of reward, blacks are likely to be more external than comparably situated whites. Perceived competence may increase with age leaving people more internal as they become older. Alternatively, individuals will become more external as they age if they begin to make finer distinctions with regard to the potential controllability of events. Dependents such as children are expected to limit a parent’s sense of personal control. More able individuals are likely to be more internal in their outlook. Finally, the effect of marriage is ambiguous a priori. Marriage leads to responsibilities and commitments that could reduce personal control. On the other hand, a supportive spouse can help an individual maintain or even develop a sense of personal control. Controlling directly for family and parental characteristics, and hence, controlling indirectly for personality trait locus at age 14, the youths in the data set should have been largely undifferentiated with respect to career-oriented labor market experience as of January 1, 1978.28 Therefore, differences in reported locus of control between the employed and nonemployed at a later date, in this case 1979, are likely to be due to differences in career employment experience for these work-minded recent high school graduates.29 In this study we examine whether the jobless are more likely to be external than comparably employed individuals who share equivalent factors for personality trait locus. Thus, if the jobless, the unemployed or labor force drop outs are found to be more external than individuals who are employed throughout the sample period, it may be inferred that these experiences reduce an individual’s perception of control.

RESULTS

AND IMPLICATIONS

Table 1 presents variable names, definitions, means and standard deviations for all of the variables used in the ordered probit models. Current and past bouts of both unemployment and time out of the labor force are treated as distinct spells of nonwork. Moreover, each of these labor force states is represented by two variables,

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Variable Names and Definitions for Variables used in the Ordered

Probit Models

Variable Definition

Variable Name

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Men Mean (std. Dev.)

Women Mean (std. Dev.)

2.65 (1.05)

2.59 (1.05)

LOC

= Product of the responses to the four Rotter questions.

.06

.04

CUNI

= 1 if currently unemployed, 0 otherwise.

c.25)

C.20)

COLFI

= 1 if currently out of the labor force, 0 otherwise.

f.22)

C.37)

CUND

= fraction of total amount of time between first 1978 date of employment and the locus interview date spent in current spell of unemployment.

.Ol c.06)

.Ol C.05)

= fraction of time between first 1978 date of employment and the locus interview date spent in current spell out of the labor force.

.Ol c.06)

.04 C.11)

= 1 if at any point of time between first 1978 date of employment and the locus interview date a spell of unemployment was completed, and no spells of OLF, 0 otherwise.

.I8 f.38)

.I2 C.33)

= 1 if at any point of time between first 1978 date of employment and the locus interview date an out of the labor force spell was completed and no spells of unemployment, 0 otherwise.

.19 f.39)

f.40)

= 1 if at any period of time between first 1978 date of employment and the locus interview date a spell of both unemployment and OLF was completed, 0 otherwise.

C.40)

= fraction of time between first 1978 date of employment and the locus interview date spent in completed spells of unemployment if experience no OLF.

C.10)

= fraction of time between first 1978 date of employment and the locus interview date spent in completed out of the labor force spells if experience no unemployment.

.02

.04

C.09)

(.I41

= fraction if time between first 1978 date of employment and the locus interview date spent in completed out of the labor force spells if experience no unemployment.

.04 C.12)

.lO (21)

.14

.I5

RACE

= 1 if Black, 0 otherwise.

C.35)

c.36)

AGE

= Age

19.81 (1.20)

19.70 (1.19)

.I3 MARRIED

= 1 if married, 0 otherwise.

C.34)

.30 c.46)

READING

= 1 if at age 14, any household member received magazines, newspapers, or had a library card, 0 otherwise.

c.28)

.93 c.26)

= 1 if occupation of either parents in household at age 14 was professional or manager, 0 otherwise.

.I8 C.39)

C.37)

TWOPAR

= 1 if both parents lived in household when respondent was 14, 0 otherwise.

.75 C.43)

.73 f.44)

PAREDUC

average highest grade completed by respondent’s parents.

11.10 (2.22)

10.94 (2.11)

RELIGION

= 1 if affiliated with any religious group, 0 otherwise.

.86 C.34)

.89 C.31)

AFQT

Score on the Armed Forces Qualifying Test

68.30 (20.26)

68.03 (17.47)

KIDS

= 1 if respondent has a child in the house-hold, 0 otherwise.

.07 c.26)

C.41)

.05

COLFD PUN

POLFI

PNOI

PUND

POLFD

PNOD

PROFPAR

.20

.03

.92

.I7

.21

.32 C.47) .02 (.lO)

.I 7

.22

Psychological

impact

347

of Unemployment

one accounting for their incidence and the other for the extent or duration. The model is estimated using separate data sets for males and females using the “Abbreviated Rotter” as the dependent variable. The mean Abbreviated Rotter score for male and female youths, 2.65 and 2.59, reveals that members of both groups are “moderately” internal. At the moment when the locus of control information were collected, 11% of the males and 21% of the females in the sample were currently jobless. Four percent of the females youths were unemployed, and 17% had left the labor force. Six percent of the male youths were experiencing unemployment, and 5% had dropped out of the labor force. During 1978, after having secured a job, 18% of the males and 12% of the females completed at least one spell of unemployment, while spending no time out of the labor force. In addition, 19% of the young males and 21% of the young females had exited the labor force at some point, but never experienced unemployment during the sample period. Finally, an additional 20% of the males and 32% of the females in the sample were exposed to both unemployment and time OLF. The average length of the sample period was 5 1.1 and 50.4 weeks for male and female youths respectively. The top half of Table 2 presents conditional means for the prior duration of joblessness variables. Mean weeks of duration, calculated as the product of the conditional mean and sample period length, are presented in the lower portions of Table 2. For instance, among the individuals who experienced both forms of joblessness, the average amount of time spent in completed spells of nonwork was 15.3 weeks for males and 20.7 weeks for females. Psychologists have been hampered by data limitations in their efforts to understand the relation between economic events, having direct personal repercussions, and emotional well-being. Results are reported in Table 3. Using the detailed longitudinal information provided by the NLSY we find that young males who are currently or have recently experienced unemployment or time out of the labor force are largely able to avoid becoming more external in their disposition and outlook.

Table 2.

Conditional

Means for Share of Sample

Period Spent in Various Completed Type ofloblessness

Ma/es

Females

.20

.25

.21

.27

.30

.41

1

PUND PUNI POLF

Duration

States of Joblessness

= 1

1

POLFI = 1 PNOD PNOI

) = 1

Mean Weeks ofjoblessness

Duratoin

10.2

12.6

POLFI = 1

10.7

13.6

PNOI

15.3

20.7

PUNI

= 1

= 1

THE

348

Table 3.

Ordered

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Probit Estimates: Degree of Internalization

Expected Sign

Ma/es

Females

-.16

.40 (1.19)

CUNI

?

c.72)

COLFI

?

c.42)

.ll

_

CUND

-.12 C.14) .39

COLFD

C.44) .03

-.Ol c.06) -2.15 (1.45)* .56 (1.05) -.I7 (1.14)

PUNI

_

POLFI

_

PNOI

_

PUND

_

POLFD

_

PNOD

_

RACE

?

C.31) .Ol

.Ol

AGE

?

(.20)

C.11)

AFQT

+

.Ol (3.33)***

.Ol (5.07)***

KIDS

_

MARRIED

?

c.23)

.12

-.03 c.27)

C.98) .04

-.I6 (1.14)

c.32) .I6

.Ol (.Ol)

C.35)

-.62 (1.20)

c.88)

-.23 C.50) -.04

-.17 c.84) .03

.31

p.34 (1.35)’ .I 1 (I .06)

-.I 7 (I .66)** -.08 C.91)

C.21) .16

.04

READING

+

C.98)

(.3(X

PROFPAR

+

.I7 (1.50)*

c.25)

TWOPAR

+

c.72)

C.92)

PAREDUC

+

-.02 (1 .OO)

C.85)

RELIGION

+

-.14 (I .I 3)

C.54)

-.07

Notes:

n PRO6

> Chi

t Statistics

2

appear

in

.03

-.08

790

.08

,000

( 1.

significantly

.07

667

different from zero at the ,I confidence level. **Statistically significantly different from zero at the .05 confidence level. ***Statistically significantly different from zero at the .Ol confidence level. *Statistically

.02


349

However, for female youths an important aspect of personality and psychological well-being, locus of control, appears to be influenced by labor market experiences. As the duration of current unemployment (CUND) expands the typical female youth becomes more external. In addition, as the extent advances of prior exposure to joblessness, entailing both unemployment and time spent out of the labor force, feelings of externality and helplessness are more likely. This finding suggest that some psychological scarring may accompany joblessness for young females. Academic achievement, as measured by scores on the Armed Forces Qualifying Test, AFQT, is positively related to being internal, as expected.30 The presence of children (KIDS) fosters significant feeling of externality for female youths, but not for male youths. Male youths with at least one professional parent (PROPPAR) are significantly more internal than comparable males without a professional parent. Surprisingly, current locus of control is independent of age, race, and marital status as well as the set of variables reflecting adolescent home environment for youths of both genders. An ongoing controversy in economics concerns the similarities and differences of individuals characterized as unemployed and OLF. The debate is largely centered on external personal characteristics and mobility between these two nonwork states and employment. This study contributes to this debate by offering evidence about whether one important aspect of an individuals psychological profile, locus of control, differs between members of these groups. The pure effects of past time spent unemployed and out of the labor force on locus of control are statistically equivalent, i.e. no influence, for youths regardless of gender. This evidence, along with the finding that both forms of current joblessness are unrelated to locus of control for males, is consistent with the Clark and Summers (1979) view that the unemployed and labor force drop outs are indistinguishable. However, there is a statistically significant difference between the effects of current unemployment (CUND) and OLF (COLFD) duration on personal efficacy for female youths. This finding is consistent with Gonul (1992) who offers evidence that unemployment and out of the labor force are distinct states for females but not for males. Her explanation is that OLF and unemployment are more clearly defined for women since they are more likely to be absorbed in the more traditional role of home care and child care when they are OLF, while they are clearly “searching” when unemployed. Thus, gender-specific support exists for the Flinn and Heckman (1982,83) hypothesis that unemployment and OLF are distinct states.“’ Ruhm (1991) argued that to understand the impact of unemployment it is essential to examine both the long and short run consequences. He asked if permanent job displacement (e.g., layoff without recall within 2 calendar years) results in blemishes (e.g., transitory effects) or scars (e.g., persistent effects). If dislo-

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cated individuals continue to be unemployed more often and earn less several years following their displacement than comparable but never dislocated individuals, Ruhm identified them as “scarred.” Using data on household heads for 1969-1982 from the Michigan Panel Study of Income Dynamics (PSID), Ruhm reported that permanent displacement generates a large (e.g., lo-17% and persistent adverse impact on earnings, resulting in a significant loss of long term earnings potential. Meanwhile, subsequent unemployment differentials diminish systematically with less than a two week differential characterizing the fourth post displacement year. In spite of these seemingly inconsistent findings, Ruhm argues that “Although permanent loss of jobs leads to unemployment distinguished by its long duration, there is no evidence that these initial difficulties translate into lasting scars.” Unfortunately, the data do not permit such a strong claim. Using the PSID, Ruhm is unable to account for the psychological consequences of unemployment exposure, which may persist, even after reemployment. Indeed, our findings reveal that female youths may suffer psychological scars as a result of exposure to joblessness. As the portion of the past year spent jobless increases their likelihood of holding beliefs of personal efficacy declines. Further research that examines a wide array of psychological consequences (e.g., selfesteem, anxiety, depression) both during unemployment and following reemployment over a longer time period is necessary before a definitive statement can be made regarding scarring from unemployment. However, it is clear that a broader framework of analysis is needed to determine if permanent displacement leads to scars or blemishes. CONCLUDING

REMARKS

Should society be concerned that female youths who are unemployed or who experienced joblessness in the past are more likely to possess an external locus of control? Do the emotional costs associated with joblessness ultimately spillover and affect the rest of society? Evidence reviewed by Lefcourt (1982) suggests that personal productivity is likely to be compromised by external beliefs. If employers are aware of or believe psychological “scarring” accompanies joblessness, then the perceived psychological affects of joblessness may account for the difficulty many of the jobless experience in trying to locate work. Hence, an external locus amongst the jobless would account for unemployment hysteresis and the need for greater social spending.32 How does external locus of control manifest itself in foregone productivity? Locus of control influences all phases of productivity and task performance: problem recognition, information retrieval, evaluation, and interpretation as well as decision making. Lefcourt (1967) reports that internals were more able to perceive the challenges inherent in different situations and consequently had little need of direction in recognizing and solving problems. Lefcourt, Gronnerud, and McDonald (1973) find that internals are more intellectually

351


flexible and are quicker at perceiving change. If change leads to problems that must be addressed than internals will be relatively more adept at recognizing problems at an early stage of development. Seeman and Evans (1962) Seeman (1963) and Davis Phares (1967) provide support for the notion that internals, relative to externals, are more inclined to seek information relevant to the solution of a problem or task confronting them. Wolk and Ducette (1974) find that internals are more effective in locating and remembering information incidental, but relevant, to the solution of a task. Phares (1968) reports that internals are better evaluators since they make better use of information than externals when both have same amount of information. Williams and Stack (1972) and DuCette and Wolk (1973) find that internals are quicker at extracting cues that facilitate making an accurate analysis. In addition, Platt (1969) reports that internals are more discriminate about what influences they will utilize in the evaluation process. According to Lefcourt (1982) internals are simply more calculating in the evaluation of data deemed relevant to making a choice. Richie and Phares (1969) find that internals while not invariant in their beliefs, once they have formed a judgement are resistant to influence. According to Crowne and Liverant (1963) externals are less confident in their own assessments. Finally, internals appear to concentrate better (DiNardo and Raymond, 1979) are more likely to assist others in completing tasks (Lefcourt, 1982), and are prone to more ethical behavior (Johnson, Ackerman, Frank and Fionda, 1968). Moreover, Anderson (1977) reports that in coping with a stressful situation, externals coped by using fewer problem solving coping methods and more emotionally directed coping devices including hostility. The preponderance of evidence cited above compelled Lefcourt (1982) to assert that internals are more self directed individuals who are likely to engage in more complex cognitive activity. Thus, the potential interplay between the psychological consequences of exposure to unemployment on subsequent productivity warrants greater attention in discussions of the costs of unemployment and hence in the design and implementation of public policy. APPENDIX A The “Abbreviated Rotter” is constructed as the sum score on the following four questions where the internal response is scored as one and an external response as zero. Question 1: “What happens to me is my own doing” (internal response) and, “sometimes I feel that I don’t have enough control over the direction my life is taking” (external response). Question 2: “When I make plans, I am almost certain that I can make them work” (internal response) and, “it is not always wise to plan too far ahead, because many things turn out to be a matter or good or bad fortune anyhow” (external response).

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Question 3: “In my case, getting what I want has little or nothing to do with luck” (internal response) and, “many times we might just as well decide what to do by flipping a coin” (external response). Question 4: “It is impossible for me to believe that chance or luck plays an important role in my life” (internal response) and, “many times I feel that I have little influence over the things that happen to me” (external response).

Acknowledgments:

The authors are indebted to Stuart Low for his insights and advice during the formative stage of this research and for his useful comments on earlier drafts of this manuscript. This research was supported, in part, by a R. E. Lee Summer Research Grant from Washington and Lee University. Finally, the views expressed in this paper are those of the authors and do not reflect the policies or views of the U. S. Bureau of Labor Statistics.”

NOTES 1.

(1984) reports a 4% loss in output per unit increase in unemployment when the lag in the response of output to greater unemployment is accounted for. It is interesting to note that some economists including Isaac (1993) and Goldsmith and Darity Gordon

(1992) measure 2. 3. 4.

5.

6.

question

the conceptual

the monetary

basis of the natural

costs of unemployment

rate and hence

are skeptical

about

efforts

to

offered by Okun and Gordon. discussion of the relation between

using the technique

See Atkinson and Micklewright (1991) for an excellent unemployment insurance expenditures and unemployment. It is possible that scarring exists for those experiencing long duration of displacement. However, Ruhm did not adjust for length of exposure nor were the data stratified by duration. For an excellent description and psychometric evaluation of the most commonly used measurement instruments of self-concept, which include aspects of emotional well-being, see Wylie (1989). A number of public health epidemiologists including Brenner (1976), Platt (1984), Boor (1980), and Catalan0 and Dooley (1977, 1979) have attempted to stimulate research on the social psychological consequences of unemployment by documenting the direct correlation between GNP and heart disease, alcoholism and suicide in the United States and other countries. See for example, Tiggemann and Winefield (1984), Winefield and Tiggemann (1985), Gurney (1980), and Patton and Noller (1984). Interestingly, economists Pames and King (1977) adopted this technique even though they had some detailed personal information available. For a concise review of the literature on helplessness see Arkes and Garske (1982, pp. 357363) and Beck (1990). pp. 253-267). Miller and Seligman (1973) using human subjects find that people with elevated levels of helplessness believe their own actions will have little or no effect on subsequent events in their lives. They also report that repeated exposure to uncontrollable events produces chronic interference with willingness to initiate activities to overcome obstacles or solve problems. Learned helplessness experiments conducted by Seligman and Maier (1967) and Maier, Seligman, and Soloman (1969) using laboratory animals show that prior experience with inescapable shock greatly interferes with later escape and avoidance learning. For a more detailed discussion of the studies conducted by Seligman and his colleagues cited in this paper, see Goldsmith and Darity (1992).


353

Moreover, if an individual feels compelled to “quit” due, for instance, to adverse changes in conditions of work, their unemployment may be more appropriately designated as involuntary. 11. Heider is known as the founder of attribution theory. 12. A number of other well known scales have been developed to measure locus of control including the Nowicki and Strickland scale, the Reid-Ware three factor scale and the Stanford Preschool scale, however the Rotter scale is the most widely used. For a detailed discussion of these and other personal control scales, along with their content, see Lefcourt (1982). 13. Gorman (1968) McArthur (1970), Smith (1970), and Reimanis (1971) offer evidence that contemporary events influence individuals perceptions of causality and hence control. Gorman (1968), and McArthur (1970) found that locus of control was influenced by the 1968 presidential election and the draft lottery respectively. Smith (1970), and Reimanis (1971) report that counseling alters sense of personal control. 14. Both Harrison and Hill conducted detailed personal interviews with unemployed individuals in an effort to understand the time profile of the psychological consequences of unemployment. 1.5. Individuals also may become more external at this point in an effort to preserve what remains of their self-esteem by relieving self-blame. 16. Harrison and Hill are not the first to notice the phased impact of unemployment exposure on emotional well-being. Eisenberg and Lazarsfield (1938) in summarizing the interviews they conducted report that all writers who have described the course of unemployment seem to agree on the following points: first there is shock, during which the individual is still optimistic and unbroken. Second, when all efforts to obtain work fail, the individual becomes pessimistic and suffers active distress. In the third stage, the individual becomes fatalistic and adapts himself to his new state. Indirect support for the variable psychological impact profile hypothesis of Harrison and Hill is provided by Baum et al. They find that among the unemployed the persistence of effort applied to solve problems declines as unemployment duration increases. Lack of persistence simply may reflect greater helplessness as unemployment lengthens. 17. In addition to Rotter’s measure of locus of control, information has been collected on Rosenberg’s measure of self-esteem and the GHQ which attempts to detect non-psychotic psychiatric symptoms. 18. There are a few exceptions worthy of note. When only one year expires between the baseline and follow-up there is no difference between the employed and unemployed. The unemployed group in 1988 exhibits the same locus as at the baseline. Winefield and Tiggemann (1985) grouped individuals by labor force status and by continued formal education at follow-up. In this study, the group of subsequently unemployed are, relative to the employed, significantly more external in locus at the baseline. This finding leads them to conclude that externalization may be a predisposing factor for unemployment. Hence, it can be inferred that an individual’s personality trait locus formed as a youth leads to subsequent unemployment. The unemployed cause their own unemployment. 19. These results support the suggestion made by Tiffany et al. (1970) and O’Brien and Kabanoff (1979) that unemployment leads to an increase in externalization. O’Brien, and Kabanoff using data on labor force participants in metropolitan Adelaide find the unemployed are significantly more external than the employed. In light of this finding they state that “the existence of an external control orientation in the unemployed is probably due to life experiences, including unemployment...” Since the study uses a questionnaire given at a fixed point in time it could be that the externality of the unemployed is due to differences that existed m to unemployment. Hence, they are limited to making a “suggestion.” 20. An additional concern about the Patton and Noller (1984) study is the paucity of data. Their sample only consists of 24 employed and 21 unemployed individuals. 10.

354 21.

22.

23. 24.

25.

26. 27. 28. 29.

30. 31.

32.

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Clark and Summers (1979) found that almost half of all unemployment spells end with individuals leaving the labor force. They also found that nearly half of those who withdrew continued to desire a job, but the inability to find work led them to stop searching. Clark and Summers also reported that 34% of the individuals who withdraw from the labor force re-enter within a month and 44% within two months. Most return to the labor force in an unemployed status. The duration of a completed spell of unemployment almost doubles when short spells of withdrawal are considered part of a continuous bout of unemployment. The data set constructed by Flinn and Heckman tracks the labor force and out of the labor force status of 122 young white men for 30 consecutive months from the time of graduation from high school. For a detailed discussion of psychological development during adolescence see Erikson (1968). The rationale for the sole inclusion of these four questions is contained in the 1978 OMB Clearance Package for the NLS in a section on content justification. The following statement appears in the Clearance Package, “... we have selected the four Rotter items that our work and that of others has shown to be the most powerful predictor of internality-externality.” In studies of the relation between labor force experience and psychological well-being Feather and O’Brien (1986) and O’Brien and Kabanoff (1979) used a nine item subset, while Payne, Warr and Hartley (1984) constructed a measure of perceived personal efficacy with four items characterized by high item-total correlation in the original Rotter (1966) scale. The four questions used to construct the dependent variable appear in Appendix A. Of course, it would have been desirable to have this same information at an earlier age. Their noncareer experiences may differ due to their interest in and their ability to secure partime employment during high school. The sample was separated into two groups. One group contained individuals who had completed a spell of joblessness during the year prior to locus measurement. The second group was composed of those who have no history of prior joblessness. F-tests reveal that generally there is no statistically significant difference in the mean value of each of the variables used to account for the early formation of personality trait locus (e.g., TWOPAR, READING,...) between these two groups. The lone exception is that individuals who had completed a spell of joblessness were significantly less likely to have had both parents in the home when they were 14 years old. See O’Neill (1990) for a recent study that uses score on the Armed Forces Qualifying Test to measure academic achievement. 31. A likelihood ratio test rejected the null hypothesis that the impact of a one unit increase in CUND is equivalent to a one unit increase in COLFD at the 1 level of confidence (Chi sq. [l] = 2.98, Probability > Chi sq. = ,084). See Darity and Goldsmith (1993) for a discussion of the individually based psychological consequences of unemployment exposure and their relation to aggregate unemployment rate hysteresis.

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