This paper examines the non-pecuniary costs of unemployment using a longitudinal dataset on life satisfaction among working-age men in Germany. The authors find that unemployment has a significant and substantial negative impact on satisfaction, even after controlling for individual-specific fixed effects. The non-pecuniary costs, such as social relationships and self-esteem, are much larger than the pecuniary costs associated with income loss. The study also explores the distinction between non-participation and unemployment, finding that unemployment is more detrimental to satisfaction than non-participation. Additionally, the paper decomposes the costs of unemployment into direct (pecuniary) and indirect (non-pecuniary) costs, showing that the non-pecuniary costs are significantly higher. The findings suggest that the psychological costs of unemployment are crucial for understanding the social and economic impacts of joblessness.This paper examines the non-pecuniary costs of unemployment using a longitudinal dataset on life satisfaction among working-age men in Germany. The authors find that unemployment has a significant and substantial negative impact on satisfaction, even after controlling for individual-specific fixed effects. The non-pecuniary costs, such as social relationships and self-esteem, are much larger than the pecuniary costs associated with income loss. The study also explores the distinction between non-participation and unemployment, finding that unemployment is more detrimental to satisfaction than non-participation. Additionally, the paper decomposes the costs of unemployment into direct (pecuniary) and indirect (non-pecuniary) costs, showing that the non-pecuniary costs are significantly higher. The findings suggest that the psychological costs of unemployment are crucial for understanding the social and economic impacts of joblessness.