Unemployment entry and life satisfaction in Germany: types of unemployment benefits and the mediating roles of income losses and material deprivation dimensions

Abstract Unemployment benefits can cushion negative consequences of job loss on subjective well-being by providing both income support and assistance in job search. However, their capacity to mitigate effect of unemployment varies by benefit type. We focus on differences between Germany’s unemployment insurance benefit and basic income support. As expected, findings of fixed effects models on transitions from employment to unemployment demonstrate that a loss in life satisfaction is imminent, but more pronounced among recipients of basic income support. Mediation analysis shows that the increase in material deprivation explains a greater proportion of the reduction in life satisfaction than the loss of household income, both for recipients of basic income support and unemployment insurance benefits. The most significant domains of material deprivation are restrictions on the financial security of the household, such as not being able to save or handle unexpected expenses, and fewer means for social activities.