Does unemployment harm mental health?

Lídia Farré, Universitat de Barcelona, IAE (CSIC), MOVE and IZA
Francesco Fasani, Queen Mary University of London, IZA and CEPR
Hannes Mueller, IAE (CSIC), Barcelona GSE and MOVE
Adaptation: Michele Catanzaro

Long-term unemployment is a probable cause of mental health disorders. This article analyses how the collapse of the construction industry left many former employees in the sector without jobs for long periods of time. An analysis of national health surveys shows the mental health of these people suffered severely during this period. The burden of these mental health problems is so great that it may even have slowed the recovery of the whole Spanish economy.
Key points
  • 1
       Between 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.
  • 2
       During 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%.
  • 3
       In 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.
  • 4
       The 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 impact of unemployment on mental health
The impact of unemployment on mental health

Does unemployment affect mental health, or is it the other way round? Unemployment and mental health are connected. However, some researchers have asked the question whether it is unemployment that causes mental health problems, or whether people with mental health difficulties are more likely to become jobless. The extraordinary nature of the financial crisis in Spain has made it possible to establish that in all likelihood it is unemployment that affects workers’ mental health and not vice versa.

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