Employment Status and Subjective Well-Being: Evidence from Indonesia

John T. Giles, World Bank Group
Dimitris Mavridis, Paris School of Economics
Firman Witoelar, World Bank Group

Are self-employed informal sector workers more or less happy than workers earning a wage? Employing data from the Indonesia Family Life Survey, this study investigates the association between informality and subjective well-being of individuals. We first document whether informality is associated with lower job and life satisfaction, and then examine whether there are significant differences by gender in differential job and life satisfaction and subjective well-being between formal and informal sector employment. The longitudinal feature of the IFLS allows us to examine the evolution of SWB while controlling for unobserved individual characteristics that might drive the results in other studies. Then, by combining the data with nationally representative labor surveys, the SAKERNAS, the paper exploits county-level shocks to wage employment to examine the extent to which involuntary employment in Indonesia’s informal sector affects dimensions of well-being.