ARE BEING UNEMPLOYED AND BEING OUT OF THE LABOR-FORCE DISTINCT STATES- A PSYCHOLOGICAL APPROACH

Clark and Summers (1979) found a high rate of transition between unemp loyed and out of the labor force status. These findings led them to co nclude that ''many of those classified as not in the labor force are f unctionally indistinguishable from the unemployed.'' Flinn and Heckman (1982,1983) questioned the validity of the conclusion reached by Clar k and Summers. Heretofore, the debate between Clark and Summers and Fl inn and Heckman over whether the two forms of nonemployment are distin ct states has been conducted by examining transition probabilities and observable external characteristics. Unfortunately, the narrowness of the debate may have prevented this issue from being resolved. Psychol ogists have offered several explanations that seek to establish how ex periences such as joblessness can lead to a deterioration in psycholog ical health. For instance, unemployment may damage a person's locus of control, a concept that accounts for perceptions of personal efficacy , leaving them with a sense of helplessness. Although the psychologica l status of individuals in the two states of joblessness may differ, d ue to their respective rationales for withdrawal from the labor force, this possibility has yet to be investigated. This paper uses data fro m the National Longitudinal Survey of Youth (NLSY) to examine whether a difference in psychological well-being exists between the unemployed and labor force drop outs. We find some evidence that joblessness fos ters feelings of externality. In addition, we also find evidence in fa vor of the stages of psychological impairment theory. Moreover, as the duration of joblessness advances so do feelings of helplessness. Fina lly, on balance, we offer evidence on the psychological status of the jobless that is consistent with the view of Clark and Summers that the two forms of joblessness are effectively indistinguishable.