Exploring the link between unemployment and mental health outcomes
By Arthur Goldsmith, PhD (left), and Timothy Diette, PhD (right), of the Department of Economics at Washington & Lee University
The U.S. economy shed over 10 million jobs from 2007 to 2009 and gross domestic product (GDP) dropped by more than 5 percent — the largest decline since World War II. The unemployment rate soared from 5 percent to well over 9 percent, leading this period to be dubbed the Great Recession. At the height of the Great Recession the average bout of unemployment lasted half a year and some estimates suggest that half of the unemployed were out of work for more than two years. This was an economically devastating epoch in our nation’s history.
Psychologists (Eisenberg and Lazarsfield 1938) and sociologists (Jahoda et al. 1933) have argued as far back as the Great Depression that unemployment damages emotional health and undermines the social fabric of society. Psychologists draw a conceptual connection between involuntary joblessness and mental health in numerous ways such as: incomplete psychosocial development (Erikson 1959), feelings of helplessness brought on by a perceived lack of control (Seligman 1975) and failure to obtain the nonmonetary benefits of work (Warr 1987).
Erikson postulates that healthy personality and emotional development during adulthood require that a person believes they are making strides to enrich themselves by contributing to their family and community. Otherwise, self-esteem is compromised during unemployment, leading to anxiety and self-doubt. Seligman asserts that feelings of “helplessness” arise when a person believes they have little influence over important events in their life such as securing meaningful work. In his view, prolonged helplessness can lead to depression. Jahoda contends that unemployment is psychologically destructive because it deprives a person of valued, but unobserved, by-products of employment including a structured day, shared experiences and status.
A widespread conviction in psychology is that the response to stressful events, such as unemployment, takes the form of a progression through stages. Shock tends to characterize the initial phase, during which the individual is still optimistic and unbroken. As unemployment advances, the individual becomes pessimistic and suffers active distress, and ultimately becomes fatalistic about their situation and adapts unenthusiastically to their new state. Thus, the unemployed are expected to exhibit poorer mental health due to elevated levels of anxiety, frustration, disappointment, alienation and depression. Moreover, these feelings are likely to be more pronounced among those who shoulder greater financial responsibilities and persons with a greater sense of self efficacy fostered by prior success in a host of domains including school and work. Thus, the highly educated and parents are particularly vulnerable to the debilitating emotional consequences of unemployment. A host of factors may buffer the adverse psychological impact of involuntary joblessness including an understanding spouse, parents, siblings, adult children and friends.
Social scientists from a range of disciplines have provided cross-sectional evidence of a connection between unemployment and various indicators of mental health.1 However, these researchers recognize the potential for reserve causality where poor mental health can lead to joblessness and thus call their results into question. Numerous researchers attempt to address this problem by examining persons who switch over time from work to unemployment. However, their findings supporting the link between unemployment and a decline in emotional well-being, although compelling, are not definitive evidence of a causal link because something unobserved by the researcher may have changed before the onset of unemployment that damaged a person’s emotional wellbeing such as disappointments at work or unexpected health problems. A second shortcoming identified by Kessler, Turner and House (1988) in conventional studies using both cross-sectional and panel data is the selection into unemployment on the basis of prior mental health.2 This makes it challenging to decipher if unemployment causes poor mental health.
In a recent study, we apply a new strategy to address both of these concerns. We first restrict our analysis to individuals who have never had bouts of poor mental health prior to the last 52 weeks. This strategy reduces the likelihood that poor mental health causes unemployment. It also allows us to interpret the effect of unemployment on emotional health for an individual in good mental health prior to unemployment. Second, we separate those in the sample into three groups based on their employment history during the past 52 weeks: employed the entire period, experiencing less than 26 weeks of unemployment or short-term unemployed and experiencing 26 or more weeks of unemployment or more long-term unemployed. This will allow us to test the hypothesis that short bouts of unemployment are less traumatic than longer spells.
Our results shed light on a number of key issues and can be interpreted as causal with greater confidence than existing findings in the literature. First, we add to evidence that long-term unemployment has large negative effects on mental health. Second, the negative effects are larger for black and Latino individuals. Third, short-term unemployment does not significantly harm mental health. Fourth, the potential buffers mentioned earlier do not appear to substantially change the odds of suffering from poor mental health with the exception of having a living father. Finally, those with more education suffer a larger emotional penalty for being long-term unemployed.
The body of evidence offered by social scientists, including psychologists, suggests that ignoring mental health costs understate the negative effects of long-term unemployment. Thus, public policies aimed at improving labor market performance should account for the mental health costs of joblessness. Our research highlights the importance of implementing policies and programs that reduce unemployment, especially long-term unemployment. Moreover, public policy should be mindful of the support needed by those who are long-term unemployed.
1Examples include: stress (Liem and Liem 1988), depression (Kessler, Turner and House 1988; Fryer and Payne 1986), anxiety (Kessler, Turner and House 1989), and poor self-esteem (Feather 1982; Tiggemann and Winefield 1984; Goldsmith, Veum and Darity 1997). McKee-Ryan et al. (2005) and Paul and Moser (2009) offer meta-analysis reviews studies exploring the link between various forms of emotional health and unemployment.