Job Insecurity, Debt Burdens, and Individual Health

• Published date: 01 December 2021
• Author: Maite Blázquez,Santiago Budría,Ana I. Moro‐Egido
• Date: 01 December 2021
• DOI: http://doi.org/10.1111/roiw.12506

© 2021 International Association for Research in Income and Wealth

872

JOB INSECURITY, DEBT BURDENS, AND INDIVIDUAL HEALTH

by Maite blázquez*

UAM

Santiago budría

U. Nebrija, CEEAplA

Santiago budría

IZA

AND

ana i. Moro-egido

UGR

Job insecurity exerts negative effects on self-reported health. Using the Spanish Survey of Household

Finances for 2011–2014, this paper asks whether and to what extent debt burdens enhance these detri-

mental health effects. To address potential endogeneity problems surrounding this question, the paper

adopts Deb and Trivedi’s (Econometrics Journal, 9, 307–331, 2006) econometric approach. The results

show that the negative effect of job insecurity on self-assessed health is exacerbated if the individual

is over-indebted. Moreover, the role of over-indebtedness differs between types of debt, with non-

mortgage debts causing larger health losses than mortgage debts. Thus, concerns about job insecurity

should not be decoupled from concerns about increasing household indebtedness, and policy measures

intended to improve individual welfare should consider both phenomena together.

JEL Codes: G010, I130, I220

Keywords: self-assessed health, job insecurity, debt burdens

1. introduction

The harmful effects of job insecurity, an important domain of economic

insecurity, into individual well-being have gained attention among politicians and

practitioners in the EU area, especially after the great recession of 2008. In this

respect, the Commission on the Measurement of Economic Performance and

Social Progress has recognized economic insecurity as fundamental to understand

people’s economic well-being and to give economic policy a wider perspective (see

Stiglitz et al., 2009, p. 198).

Note: The financial support from R\&D\&r programmes of the Spanish Government through

project PID2019-111765GB-I00, from the Regional Government of Andalusia through project

PY18-4115 and from Regional Government of Madrid through project H2019/HUM-5793 is gratefully

acknowledged. We also appreciate comments from editor and two anonymous referees.

*Correspondence to: Maite Blázquez Cuesta, Department of Economic Analysis. Universidad

Autónoma de Madrid. Cantoblanco (28049), Madrid, Spain (maite.blazquez@uam.es).

Review of Income and Wealth

Series 67, Number 4, December 2021

DOI: 10.1111/roiw.12506

bs_bs_banner

Review of Income and Wealth, Series 67, Number 4, December 2021

873

© 2021 International Association for Research in Income and Wealth

Job insecurity is a subjective experience, resulting from a person’s perception

and interpretation of the actual work environment. It might exert adverse effects

on individual’s well-being that may be as detrimental, if not more, than the actual

occurrence of job loss (Burgard et al., 2009). The feelings of uncertainty and ambi-

guity that result from lack of control over the stressful events of potential job

loss, may be among the main factors driven these deleterious effects on well-being

(Lazarus and Folkman, 1984). Moreover, the prospects of losing one’s job also

means the frustration of some fundamental human needs such as for example, the

need for survival, relatedness, and self-determination (Van den Broeck et al., 2008),

that would inevitably lead to the impairment of health and well-being.

From the great recession of 2008, the dramatic rise in the unemployment rates

and the economic turbulence might very well have induced workers at all levels of

the occupational hierarchy to see their future threatened. In parallel, in the same

period, the number of households that face severe debt-related financial difficulties

has sharply risen, making over-indebtedness of individuals and families a wide-

spread phenomenon in the EU area. This increased household’s financial fragil-

ity might have boosted the negative consequences of job insecurity on individual

well-being, which would suggest the necessity for specific policy interventions

aimed at the most fragile segments of the population.

This paper examines to what extent the effects of job insecurity on individual

well-being, measured in terms of self-assessed health (SAH), are heterogeneous

across individuals’ financial situations. We are not the first attempt to account for

such heterogeneity. However earlier literature has mainly focused on income. The

novelty of our work relies on the fact that we use debt burdens to better proxy

the financial situation of the individual. The advantages of this choice are three-

fold. First, while income is a flow and, as such, it is unable to capture long-term

financial conditions and fears, debt burdens significantly condition future financial

constraints and seriously limit the individual’s ability to buffer negative economic

shocks. Second, the negative health effects of job insecurity have been found to

be homogeneous across the entire income distribution. Specifically, the relatively

well-off (those located in the top income quartiles) suffer from job insecurity at a

magnitude comparable to those in the lowest quartiles (Lam et al., 2014; Kopasker

et al., 2018). Thus, there is no empirical evidence of income being a relevant medi-

ating factor between job insecurity on self-assessed health. Third, after the great

recession of 2008 there was a huge increase on the number of households in the

EU area that face severe debt-related financial difficulties. Apart from political

concerns on households’ ability to sustain debt burdens, rising pending debts

and its heterogeneous incidence across the population may have intensified and

introduced a substantial amount of heterogeneity in the job insecurity-health rela-

tionship. Our main contribution is the finding that over-indebtedness—especially

related to non-mortgage debts—boosts the negative impact of job insecurity on

health. This result thus would provide evidence that individual’s financial situa-

tion, in terms of debt burdens, partially shapes the heterogeneous effects of job

insecurity onto self-assessed health.

Another important feature of the paper is that it takes advantage of Deb and

Trivedi’s (2006) method to account for sources of endogeneity that surround the

association between job insecurity, debt burdens and health. On the one hand, as