The Health Consequences of Adverse Labor Market Events: Evidence from Panel Data

• Published date: 01 July 2015
• Author: Johanna Catherine Maclean,Susan L. Ettner,Douglas A. Webber,Michael T. French
• Date: 01 July 2015
• DOI: http://doi.org/10.1111/irel.12099

The Health Consequences of Adverse Labor

Market Events: Evidence from Panel Data

*

JOHANNA CATHERINE MACLEAN, DOUGLAS A. WEBBER,

MICHAEL T. FRENCH, and SUSAN L. ETTNER

This study investigates the associations between self-assessed adverse labor mar-

ket events (experiencing problems with coworkers, employment changes, financial

strain) and health. Longitudinal data are obtained from the National Epidemiologi-

cal Survey of Alcohol and Related Conditions. Our findings suggest problems

with coworkers, employment changes, and financial strain are associated, respec-

tively, with a 3.1 percent (3.3 percent), 0.9 percent (0.2 percent), and 4.5 percent

(5.1 percent) reduction in mental health among men (women). Associations are

smaller in magnitude and less significant for physical health.

Introduction

Economic theory and empirical evidence predict that the employed have bet-

ter health than the unemployed. Several channels suggest a link between

employment and health. Income is positively associated with health in standard

economic theories of the demand for health capital (Grossman 1972) and

empirical research documents that the employed have better health than the

unemployed (Roelfs et al. 2011). Features of employment such as job loss and

job satisfaction predict health even after conditioning on income (Fischer and

Sousa-Poza 2009; Sullivan and von Wachter 2009). In other words, employ-

ment can impact health through both income and nonincome channels. Given

the centrality of paid work in American life, understanding and mitigating the

health consequences of experiencing adversity in the labor market could lead

to health improvements for a substantial segment of the population.

*The authors’affiliations are, respectively, Temple University, Philadelphia, Pennsylvania; Email:

catherine.maclean@temple.edu; Temple University, Philadelphia, Pennsylvania and IZA; Email: douglas.

webber@temple.edu; University of Miami, Miami, Florida. Email: mfrench@miami.edu; David Geffen

School of Medicine and Department of Health Policy and Management, Jonathan and Karin Fielding School

of Public Health at the University of California Los Angeles, Los Angeles, California; Email: settner@

mednet.ucla.edu.

JEL: I1, I12, J2.

INDUSTRIAL RELATIONS, Vol. 54, No. 3 (July 2015). ©2015 Regents of the University of California

Published by Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington

Road, Oxford, OX4 2DQ, UK.

478

In this study we extend the knowledge base on employment and health by

examining whether experiencing three novel and common adverse labor mar-

ket events measured from the worker’s perceptive are associated with mental

and physical health. Our measures of adverse labor market events include self-

reported problems with coworkers, employment changes, and perceived finan-

cial strain.

1

We obtain data on a sample of men and women ages 25 to 64

years from the National Epidemiological Survey of Alcohol and Related Con-

ditions (NESARC). The longitudinal nature of our data allows us to control

for time-invariant unobserved person-level heterogeneity, which could bias

cross-sectional analyses. Our results indicate that experiencing problems with

coworkers, employment changes, and financial strain are associated with a 3.1

percent (3.3 percent), 0.9 percent (0.2 percent), and 4.5 percent (5.1 percent)

reduction in mental health among men (women), respectively. The estimated

associations are smaller in magnitude and less significant for physical health.

We provide evidence that our results are not fully attributable to reverse cau-

sality or attrition.

This study makes several contributions to the economics literature. First, we

consider three important and relatively common adverse labor-market events

that have received little attention in the economics literature. Problems with

coworkers occur frequently in modern workplaces as evidenced by the atten-

tion they receive in the popular media (e.g., television, books, magazines,

blogs). Similarly, taking on new responsibilities at work or changing work

hours, or jobs themselves, are typical transitions as workers progress along the

employment ladder, but could lead to stress (e.g., learning new skills,

establishing relationships with new colleagues, longer work hours, increased

responsibility). The 2007 to 2009 recession led to substantial reductions in

labor-market earnings and potentially induced financial strain among many

Americans. Thus, estimating associations between these common and under-

studied events and health is important for understanding and improving

(through effective interventions) quality of life and worker productivity. More-

over, unlike much of the existing literature, our measures are subjective

employment experiences and thereby complement the research that examines

more objective measures (e.g., job loss). Second, this study contributes to the

literature on income and health. Although standard economic models predict

that income improves health by allowing the consumer to purchase health

inputs (Grossman 1972), empirical work has produced mixed results on the

1

Non–labor-market events can also lead to financial strain (e.g., expensive medical treatments, a declin-

ing housing market). In addition, our measure of employment change could represent a promotion or demo-

tion in position. However, we argue in a later section that either type of employment change could impose

transitional problems.

Adverse Labor Market Events and Health / 479