Shocked by therapy? Unemployment in the first years of the socio-economic transition in Poland and its long-term consequences

We examine long-term implications of unemployment for material conditions and wellbeing using the Polish sample from the Survey of Health, Ageing and Retirement in Europe (SHARE). Retrospective data from the SHARELIFE survey conducted in 2008/09 is used to reconstruct labour market experiences across the threshold of the socio-economic transformation from a centrally planned to a free market economy in Poland in the late 1980s and early 1990s. These individual experiences are matched with outcomes observed in the survey about twenty years later to examine their correlation with unemployment at the time of the transition. We find that becoming unemployed in the early 1990s correlates significantly with income, assets and a number of measures of wellbeing recorded in 2007 and 2012. Given the nature of labour market changes at the time of the transition, and an extensive set of controls we use in the estimation, we argue that the results can be given a causal interpretation. Losing a job between 1989-91 results in a reduction of total household income two decades later by over 30%, increases the probability of poor material conditions by 14 percentage points and has significant negative effects on overall life satisfaction and other measures of wellbeing.