Reconnecting to Work: Policies to Mitigate Long-Term Unemployment and Its Consequences

4 - Causality in the Relationship between Mental Health and Unemployment

63 4 Causality in the Relationship between Mental Health and Unemployment Timothy M. Diette Washington and Lee University Arthur H. Goldsmith Washington and Lee University Darrick Hamilton The New School William Darity Jr. Duke University Unemployment is costly to society and individuals. Fifty years ago economist Arthur Okun (1962) demonstrated that for the United States in the postwar period, a 1 percent increase in the unemployment rate is associated with a 3 percent decline in gross national product. Subsequent work (Moosa 1997) revealed that this rule of thumb, known as Okun’s Law, closely characterizes most developed economies. At the individual level, unemployed persons who are laid off experience financial losses in the form of a drop in income, even if they are covered by UI. Moreover, when reemployed, their wages typically fall short of their previous level for a number of reasons, one of which is that workers ’ skills are not fully portable across firms, occupations, and industries (Goldsmith and Veum 2002). Social scientists also assert that unemployment lasting more than a few weeks is damaging to mental health. For instance, two metaanalytic studies (McKee-Ryan et al. 2005; Paul and Moser 2009) report that unemployed persons have substantially poorer psychological well- 64 Diette et al. being after controlling for a wide range of factors expected to influence emotional health. However, a largely unresolved issue is whether the poor mental health status associated with the unemployed is caused by their involuntary joblessness. The purpose of this chapter is to move toward resolution of that question. First, we offer a new method for identifying whether there is a causal link between exposure to unemployment and emotional well-being. Second, by using this identification strategy, and by drawing upon data from two large nationally representative data sources—the National Comorbidity Survey Replication (NCS-R) and the National Latino and Asian American Study (NLAAS)—we estimate the impact of both short-term and long-term unemployment on a broad measure of emotional health. UNEMPLOyMENT, PSyCHOLOGICAL HEALTH, AND CAUSALITy Social psychologists have proposed a number of pathways whereby involuntary joblessness potentially diminishes emotional well-being. Jahoda (1982) contends that unemployment is psychologically destructive primarily because it deprives an individual of the latent byproducts of work, including a structured day, shared experiences, status , and opportunities for creativity and mastery.1 Erikson (1959), in his life-span development theory, asserts that healthy emotional wellbeing as an adult is contingent upon the realization of occupational success for those intent on being breadwinners; therefore, unemployment is harmful to mental health. Attribution theory (Heider 1958; Weiner 1974) suggests that individuals seek an explanation for developments in their lives. Those who blame themselves for undesirable happenings such as involuntary joblessness are likely to experience feelings of “helplessness” (Seligman 1975), which damages mood (i.e., depression, anxiety) and self-perception.2 Thus, for these persons, unemployment is expected to foster psychological distress.Anumber of psychologists and epidemiologists have asserted that the deleterious effects of unemployment increase as unemployment duration advances (Jackson and Warr 1984). They support the idea that stress accumulates, so there is reason to believe that each additional week of joblessness is even more emo- The Relationship between Mental Health and Unemployment 65 tionally damaging than prior weeks (Eisenberg and Lazarsfeld 1938; Harrison 1976). This suggests that long-term unemployment is more harmful to psychological well-being than short-term unemployment. There is an extensive empirical literature dating to the Great Depression that documents a negative association between unemployment and psychological health.3 Ethnographic studies conducted by Jahoda, Lazarsfeld, and Zeisel (1933) and Eisenberg and Lazarsfeld (1938) found that the unemployed exhibited both poor emotional wellbeing and an inferior view of themselves. Subsequently psychologists have developed inventories of questions designed to measure various dimensions of psychological health, including depression (Beck et al. 1961); anxiety (Spielberger et al. 1983); mastery or self-efficacy (Pearlin et al. 1981; Rotter 1966); self-esteem (Rosenberg 1965); and general psychiatric status (Goldberg and Blackwell 1970). Using these measures, numerous researchers conducting quantitative studies using cross-sectional survey data report that unemployed groups have lower levels of psychological well-being than employed groups. Unemployed persons have been found to exhibit higher levels of depression (Fryer and Payne 1986) and anxiety (Kessler, Turner, and House 1989), as well as lower levels of self-esteem (Feather 1982; Goldsmith, Veum, and Darity 1997) and self-efficacy (Goldsmith, Veum, and Darity 1995) compared to the employed...