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unemployed and employed people. There are two countervailing effects at work. When doing
the same activities, unemployed are unhappier than employed people. This is what we call the
saddening effect of unemployment. However, the unemployed spend part of the day on
activities that are more satisfying than working and work-related activities. In short:
unemployed people are dissatisfied with life, but they are having a good day.
These apparently paradox results might be reconciled when we look at how people may
adjust to long-term unemployment. In principle, there are two distinct ways to adapt to new
life circumstances. First, there might be hedonic adaptation. Over time, people derive less
utility from a rise in income or will suffer less from being paraplegic (Frederick and
Loewenstein 1999). Second, it might be the case that what we consider to be “satisfactory”
depends on what we actually have, i.e. our aspirations adapt when life circumstances change
(van der Praag and Ferrer-i-Carbonell 2004). Aspiration adaptation is very important when
we look at income changes. Frey and Stutzer (2002) estimate that aspiration adaptation offsets
two-thirds of the initial benefits of an increase in income.
While hedonic adaptation mainly affects how we experience our life circumstances,
aspiration adaptation may not only be affected by how we master our day-to-day life but also
by how far we meet our aspirations and goals. The general judgment of life satisfaction
cannot distinguish between these two forms of adaptation and is obtained “by combining an
imperfect assessment of the balance of affect ... in one’s life with an assessment of how well
one’s life measures up to aspirations and goals” (Kahneman and Krueger 2006, p. 9).
Furthermore, reports of life satisfaction may be subject to a focusing illusion that leads people
to exaggerate the importance of those aspects of life one focuses on when asked to assess
one’s satisfaction with life, but that rarely enter one’s mind otherwise (Kahneman and Thaler
2006, p. 229).
Using both the standard measure of general life satisfaction and the measures of
experienced utility, we can identify the extent to which hedonic adaptation and aspiration
adaptation are at work when people become unemployed and stay unemployed for a long
time. Our results show that long-term unemployed experience their day-to-day lives as more
or less equally satisfying as employed people. This suggests that we found a specific type of
hedonic adaption. We do not have (complete) hedonic adaptation when we look at similar
activities. The saddening effect indicates that the unemployed enjoy reading, watching TV,
and having meals much less than employed people do. Hedonic adaptation, however, occurs