Perception of Unemployment by Europeans
The unemployment rate is one of the key labor market indicators, which contains information about labor market activity and overall state of the economy. This information is important for economic decisions made by governments, businesses and private individuals. However, individuals rely on what they believe the unemployment to be, and those beliefs might differ a lot from the official statistics. The perception of unemployment is influenced by different country- and individual-specific factors that can make low unemployment seem high and potentially distort people’s behavior. This paper studies perception of unemployment in European countries and explores the factors affecting it. The dataset comes from the European Social Survey (ESS) and covers two years: 2008 and 2016. The paper has three main results: 1) in all the countries in the sample, perceived unemployment is higher than the actual one; 2) the degree of misperception varies across countries and socio-demographic groups; 3) the same conclusions hold for both years in the sample. The author finds that the perceptual errors are the smallest in the Scandinavian countries, Switzerland and the Czech Republic. The degree of misperception is the highest in Southern Europe, Slovenia and Russia. These cross-country differences hold for both years in the sample. One of the main factors affecting perception of unemployment is the actual unemployment rate: the higher the actual level, the higher its perception. Another important factor is sustained economic growth: the countries with stable economy are less prone to overestimating unemployment. The socio-political context also contributes to how people perceive economic indicators. In particular, the general state of anxiety in society makes people more pessimistic in how they assess economic conditions. Perceptual errors vary across social groups between and within countries. Individuals with weak positions in the labor market (e.g. women, young people) are more likely to overstate unemployment. Their misperception might be due to a lower level of education, previous unemployment experience, temporary contracts, health problems.