Does unemployment harm mental health?
- 1Between 2006 and 2011, every time the unemployment rate in the construction industry rose by ten percentage points, mental health disorders reported by workers forced out of the sector increased by around three percentage points.
- 2During the economic crisis in Spain, not only did unemployment rise but also its duration increased. In 2006, 2% of the active population had been unemployed for more than two years. By 2011, this group had nearly quadrupled, reaching almost 8%.
- 3In the construction industry, there was an 18-fold increase in the long-term unemployment rate, which rose from 0.1% of the active population in 2006 to almost 1.8% in 2011.
- 4The bursting of the property bubble provides a unique opportunity to identify the impact of unemployment on mental health. If a significant proportion of the population becomes unemployed, this generates an addition burden that holds back economic recovery.
The economic crisis that began in 2007 had a detrimental effect on the population’s mental health. Many workers who were left unemployed, especially due to the collapse of the construction sector, then had to deal with mental health problems. Stress, inability to concentrate, and a feeling of uselessness, were frequent symptoms among those affected.
This study is based on analysis of the National Health Survey for the years 2006 and 2011, to compare mental health indicators among construction workers before and after the bursting of the property bubble (Farré et al., 2018).
According to the analysis, between the two years mentioned, for every ten percentage points of increase in the unemployment rate, related mental health disorders among workers expelled from the sector grew by around 3 percentage points. Specifically, unemployment in the construction sector grew from 6% to 24%, and, in the same period, the estimated percentage of ex-construction workers who affirmed that they had suffered mental health problems increased by nearly six percentage points.
This estimate was obtained by crossing the two databases available at the website of the National Institute of Statistics. Firstly, the Active Population Survey and secondly, the National Health Survey. The first is published quarterly, whereas the second has no fixed periodicity. However, the survey was conducted in 2006 and 2011: two points in time ideal for obtaining a picture of the situation before and after the outbreak of the crisis.
The National Health Survey contains, among other data, the answers of 25,000 people to a series of questions that are normally used to diagnose mental health problems. Analysis of the data highlights various mental health disorders strongly associated with unemployment. People left unemployed by the collapse of the construction sector state that they feel stressed, that they are incapable of concentrating, and that they are not playing an important role in society. These answers from workers occurred much less frequently before they lost their jobs (figure 1).
The analysis also detects that the number of unemployed people from the construction sector who stated that they were in good health also decreased. And it was not that they were suffering from other illnesses, but, probably, that the deterioration in their mental state made them believe that they were not enjoying good health.
1. The key: long-term unemployment
The major impact of unemployment on mental health could have its explanation in the unprecedented consequences of the crisis in construction. In Spain, this is the sector that came off worst. Out of 3.8 million total job losses, one third were suffered in construction. So, while the rest of the sectors lost around 15% of their workers on average, the construction sector lost over 60%.
Also, a third of the filings for bankruptcy in Spain between 2008 and 2010 corresponded to construction companies. And the provinces that most depended on this activity suffered the worst increases in unemployment. For example, in Tenerife, 21% of the employed population in 2006 were working in construction, but between 2007 and 2011, unemployment grew in the province from 8% to 30%.
However, the feature that made the crisis in construction in Spain special is that not only did unemployment increase, but also its duration. The large majority of people who lost their jobs early on in the crisis, between 2008 and 2009, did not find work again for a long time afterwards, and many are still unemployed today. Meanwhile, in 2006, just 2% of the active population had experienced periods of unemployment longer than 2 years. In contrast, by 2011, this group had almost quadrupled to reach nearly 8%.
This situation especially affected construction workers. In 2006, anyone losing their job in construction would find new work quickly and, as shown in figure 2, the long-term unemployed (over two years unemployed) who came from the sector represented only 0.1% of the active population. However, in 2011, this group had multiplied by nearly 18, reaching close to 1.8%, whereas among the general population, people in long-term unemployment had multiplied by four.
What had happened? During the decade of the construction boom, many poorly qualified workers had been attracted towards building activities. But the sector collapsed quickly and almost completely. The capacity of those workers to find employment in another activity was almost zero. They took a long time to return to the labour market and, therefore, the duration of their unemployment was lengthened enormously. This could be the differential factor that explains the impact on mental health.
Previous studies show that the emotional state of long-term unemployed people passes through three phases (Hill John, 1977). Initially, they are optimistic as they start looking for work. In the second phase, if they do not find a job, they feel pessimistic and anxious. In the third phase, when all attempts at finding work have failed, they adapt to their new status with a fatalistic attitude and a feeling of powerlessness.
These reactions almost perfectly match the answers found in the National Health Survey. In conclusion, the long-term nature of the unemployment would be a possible explanation of the major impact that being out of work had on mental health during the crisis in Spain.
2. What comes first: unemployment or mental health problems?
The Spanish economic crisis provides a unique opportunity to tackle a very pertinent question: What is the relationship between unemployment and mental health, in general? The collapse of employment in the construction sector acts as a large-scale “social experiment” that enables light to be shed on some aspects of this question.
It is well known that unemployed people have worse mental health than their employed counterparts (Kasl and Jones, 2000). During economic crises, suicide rates usually rise, and unemployment is associated with unhappiness, depression, substance abuse and a long list of impacts on people. The analyses of the National Health Surveys confirm this picture in a comprehensive series of indicators for mental health and, in these indicators, the unemployed show worse data than the employed (figure 3).
However, is it unemployment that causes mental health problems, or vice versa? Some studies support the first hypothesis (Eliason and Storrie, 2006). Unemployment affects mental health because it causes isolation, financial stress, self-criticism and a sensation of uselessness. It also deprives people of a day with foreseeable routines, of experiences shared with other workers, of opportunities for creativity and professional development, and of the capacity to contribute to the wellbeing of the family and of society.
However, other studies point in the opposite direction (P. García-Gómez et al., 2010). Pre-existing mental health problems (and poor health in general) mean a higher probability of losing one’s job, of not finding work or of staying unemployed for a longer time.
Other researchers have tried to unravel this question by studying factory closures (Browning and Heinesen, 2012). When a plant ceases to operate, all the employees become unemployed, independently of whether they have prior mental health problems or not. In this situation, effects on mental health that appear immediately can be detected. However, those that appear in the long time are more elusive, because normally the workers start searching for work and ultimately leave unemployment after a relatively short time.
In a case like this, people with mental health problems could take longer to find a new job. But they could also take less time because they would put more effort into the task knowing that, if they don’t find a job, they will suffer more. In contrast, people with better mental health might have it easier finding a new job, but they could also take longer, because they would have fewer incentives, as they suffer less due to the loss of their employment status. In conclusion, in the case of the closure of a factory, it is impossible to unravel the long-term effects.
In contrast, the construction crisis offers a unique opportunity to identify the effects of unemployment on mental health. The bursting of the property bubble eliminated an important part of the construction sector. Also, in this case, the workers affected were left unemployed independently of their prior mental health status. However, there is an important difference: leaving unemployment behind was very difficult, or nearly impossible, because it was not just a company that had closed down but practically an entire sector. In this situation it is possible to observe the long-term effects on mental health without the disruption of a rapid return to work and without being concerned about whether mental health has an influence on the speed of that recovery of employment.
This study suggests that in this case, it is unemployment that is the cause of the mental health problems. And this very prominent effect is probably typical of crashes of a greater magnitude, that are followed by pronounced economic decline. The reason is that following a major crisis people take longer to find work, so mental health problems have the necessary time to emerge and become consolidated. In contrast, in conditions of economic stability, less effort is needed to find work, which mitigates the effects on mental health.
It is important to bear in mind also that the notable impact of unemployment on mental health found in this study is the result of an estimate based on a statistical analysis of the data. This estimate seeks to quantify exclusively the impact of unemployment on mental health, outside of other factors (social relations, individual capacities, social and healthcare support, etc.) that also affect it and that, in reality, managed to mitigate the magnitude of that impact on the Spanish population.
3. A hindrance to growth: conclusions and possible measures
The burden of mental health problems caused by the construction crisis is so significant that it could even have slowed down the economic recovery of a country that depends a great deal on this sector. Unemployment brings with it a wealth of mental health disorders. In turn, these disorders made the return of the unemployed to the labour market more difficult. Consequently, these workers would have found themselves trapped in a vicious circle: between the inadequacy of their skills for what the labour market requires and their mental health problems, which would prevent them from facing up to this situation.
If a major part of the population experiences this situation, an additional weight is generated for the resurgence of an economy battered by the crisis. Economists call this situation hysteresis (Blanchard, 2018), which occurs when the effects of a crisis persist even once it has finished and the recovery is slower than expected. In this case, hysteresis occurs when the recovery of employment and of the economy in general do not happen as quickly as was hoped even though the crisis has already ended.
Thus, a possible explanation of the slow economic recovery of Spain could be found, at least in part, in the effects of long-term unemployment on the mental health of many people.
The findings of this study could be useful for designing policies that permit enable a change in this inertia. The first goal of any specific policies based on this evidence would be to work above all on the country’s “pockets of desolation”: in other words, those areas where unemployment is most highly concentrated and where mental health problems wreak the most havoc.
Another goal would be to reduce the overall number of long-term unemployed people. Here, what is necessary are actions that facilitate the transition of affected people to other sectors of employment outside of construction.
These actions would tackle a problem, that of long-term unemployment, which is dramatic for those people suffering it, and they would also have a beneficial effect for the economy as a whole as they would lighten a burden that is exerting pressure on the recovery.
BLANCHARD, O.J. (2018): "Should we reject the natural rate hypothesis?", Journal of Economic Perspectives, 32(1).
BROWING, M., and E. HEINESEN (2012): "The effect of job loss due to plant closure on mortality and hospitalization", Journal of Health Economics, 31.
ELIASON, M., and D. STORRIE (2006): "Lasting or latent scars? Swedish evidence on the long-term effects of job displacement", Journal of Labor Economics, 24(4).
FARRÉ, L., F. FASANI and H. MUELLER (2018): "Feeling useless: the effect of unemployment on mental health in the Great Recession", IZA Journal of Labor Economics, 7(8).
GARCÍA-GÓMEZ, P., A.M. JONES and N. RICE (2010): "Health effects on labour market exits and entries", Labour Economics, 17.
HILL JOHN, M.M. (1977): The social and psychological impact of unemployment: a pilot study, Londres: Tavistock.
KASL, S.V., and B.A. JONES (2000): "The impact of job loss and retirement on health", in L.F. Berkman and I. Kawachi (eds.): Social epidemiology, Nueva York: Oxford University Press.
RUHM, C.J. (2003): "Good times make you sick", Journal of Health Economics, 22(4).
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