The influence of informal employment on residents' happiness has gained wide attention around the world. However, few studies focus on this topic in China. Using the 2016 wave of the China Labor Force Dynamics Survey (CLDS) data, we examined the effect of informal employment and its mechanisms on residents' happiness in China. Our study shows there is a significant negative correlation between informal employment and residents' happiness in China. Moreover, the correlation between informal employment and residents' happiness is stronger for residents who are female, migrating, and with a rural household registration. In addition, we investigated possible mechanisms of the effect, including individual income, social respect, unemployment expectations, and social security, and found that informal employment reduces the happiness of residents by widening the gap in unemployment probability and social insurance level among residents.
Keywords: employment discrimination; impact mechanism; informal employment; labor market; residents’ happiness.