Does unemployment make us sick?

Commentary about business and finance.
Oct. 1 2010 3:53 PM

Does Unemployment Make Us Sick?

Economists can't quite agree.

Sick. Click image to expand.
Can losing your job make you sick?

It seems like such a straightforward question: Does losing your job make you sick? And extrapolating from that: Does poor economic health—recessions and jobless recoveries—lead to poor personal health?

In economics, however, remarkably few questions have straightforward answers. And thus while the question has been much studied, there's a frustrating lack of consensus about the answer. Still, there's a lot that we can learn from the competing responses.

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Pretty much everyone agrees that unemployed people are, in the aggregate, less healthy than the rest of the population, both physically and mentally, and especially over prolonged jobless periods. Common sense suggests many reasons why: Unemployed people tend to have less money to spend on health care; they are subject to social and psychological stress, which takes its toll on the body and spirit; and, in a country where health care benefits are usually tied to a job, the jobless are less likely to have access to heath care (PDF).

The complication comes in trying to sort out cause from effect. While there are clearly some people who become sick because they lose their jobs, it may well be that many more people lose their jobs because they are sick. For that, too, common sense provides some decent explanations. Some people become too sick to continue working; sick people are likely to miss work more often, and therefore more likely to rise to the top of layoff lists; some people become sick or injured because of their work.

Theoretically, one way to filter out the pre-unemployed sick from the post-unemployed sick would be to try to look only at workers who lost their jobs for purely economic reasons, such as a business shutting down (known in the literature as "no-fault" or "exogenous" job loss). And, two studies published last year did precisely that. How did they come out? On opposite sides.

One study was conducted on behalf of the Harvard School of Public Health (PDF). It found that "losing a job because of an establishment closure increased the odds of fair or poor health by 54 percent, and among respondents with no preexisting health conditions, it increased the odds of a likely new health condition by 83 percent. This suggests that there are true health costs to job loss, beyond sicker people being more likely to lose their jobs." The other study—conducted on behalf of Germany's IZA think tank—found "no significant effect of exogenous job loss on health."

Why such disparate results? For starters, the studies examined two different sets of government data. In both cases, the authors acknowledge that while the data is extremely detailed, the actual number of people who'd lost their jobs was relatively small. There are other factors that could distort the results—such as the length of time between a job loss and being interviewed and how reliably people report their own health.

Regardless of who's right, some interesting details emerge. Among them:

How you lose your job makes a difference. Generally speaking,people who are fired or laid off for cause are more likely to experience health effects, because they take longer to find a new job, and they are likely to make less money at a future job. The IZA study also looked at an intriguing phenomenon: A fairly high percentage of workers who end up being laid off suspect that they are going to be laid off. Living with that stress could harm your health. By contrast, workers who lose their jobs in "no-fault" situations experience fewer health effects, especially for white-collar employees. And both studies found that those who voluntarily quit their jobs and are quickly re-employed actually see an improvement in their health.

Job churn may matter. Before the Great Recession, the U.S. economy was characterized by relatively low unemployment but relatively high levels of job loss; we "churn" through a lot more jobs than other developed nations. The Harvard study was especially interested in the effects of churn on health, and found that people who switch jobs  are far more likely to develop hypertension, heart disease, and arthritis. Frustratingly, it does not offer an explanation.