The impact of adverse economic experiences on depressed mood is one of the most consistent findings in the economy-health literature. Dozens of studies have found statistically significant associations between negative economic transitions and depression, although a few researchers have reported finding no effect. The great majority of these studies are at the individual level; we identified no ecological level articles examining depression that met our inclusion criteria. While findings from most individual-level studies suffer from the possibility of uncontrolled confounding by reverse causation, a few careful and rigorous studies have surmounted these difficulties and provide reasonably unbiased estimates of effect. Measuring severity of disorder by self-reported symptoms remains controversial, and only psychiatric assessment instruments based on the Diagnostic and Statistical Manual (DSM) series, such as the Composite International Diagnostic Interview Schedule, Diagnostic Interview Schedule, and Structured Clinical Interview for DSM–IV Axis I Disorders, permit diagnosis of distinct mental disorders.How conservative researchers should be in their conclusions about the nature of the economy–depression association depends on one’s view of the clinical importance of nonspecific psychological morbidity. While subclinical depression and anxiety do not generally cause substantial functional impairment, such “demoralization” is emotionally distressing and may predispose people to other adverse physical and mental health outcomes. Accordingly, we review studies using both kinds of psychological assessment instruments and do not substantially differentiate between the interpretations of their findings.
Individual-Level Studies
Research at the individual level has converged on the finding that economic contraction poses a significant risk for depression symptoms. Analyzing two large longitudinal surveys, Burgard, Brand, and House used self-reported data on the reasons for job losses, as well as the timing of the job losses and acute negative health events, to discriminate between health-related job losses and other involuntary job losses. They showed that losing a job for reasons unrelated to health significantly increased participants’ risk for depressive symptoms even after controlling for labor
force experience, mental ability, and socioeconomic variables. In a smaller scale study using a sample of Mexican-Americans, Catalano, Aldrete, Vega, Kolody, and Aguilar-Gaxiola found that odds of suffering a first-ever episode of clinical depression in the six months before the survey was more than five times higher (odds ratio [OR] = 5.7) among those who had lost jobs 7 to 12 months before the survey. Several other studies have also found evidence of increased depression and anxiety symptoms resulting from job loss, with ORs averaging somewhat under 2.0, even after controlling for mental health status at previous survey waves.
However, without detailed information about the chronology of symptoms and unemployment,
these researchers could not rule out the possibility that an unmeasured intrawave onset of depression or underlying vulnerability to mood disorder caused the subsequent job loss. While all of these studies did reaffirm previous evidence that reverse causation is an important factor in shaping labor market engagement, the consistency of their support for a causal relation between economic contraction and depression is noteworthy.
A variety of more specific permutations of the economy–depression relation have also been investigated. Some researchers have focused on how one type of economic change (usually job loss) might affect different subgroups, such as men versus women. We designate this type of study as population characteristics research. Another group of researchers have focused on how different types of economic exposures, such as layoffs versus plant closings, might affect a population. We designate this type of study exposure characteristics research.
Population characteristics. Many of the early studies in this literature focused on men, as the researchers were assessing the effects of job losses or layoffs among blue-collar factory workers, who were chiefly male. However, women are far more likely to be diagnosed with depression in the general population, and researchers have noted the value of understanding whether job loss affects men and women differently. Many studies either statistically control for sex, restrict their
analyses to either men or women, or do not examine sex differences even when possible, apparently assuming that sex is a confounder without testing to determine whether it does, in fact, confound the results. However, results from several studies indicate that sex can act as an effect modifier on the effect of economic adversity.
Some authors have found evidence that men are more psychologically affected by job loss than are women. Brand et al. found that men but not women were significantly more likely to report depression as a result of being laid off. These authors suggested that differences in social and economic roles may explain this variation: Men may have more attachment to the labor force and greater psychosocial needs for re-employment, particularly as they approach retirement, than do older women. However, the impact of sex appears to be inconsistent. Brand et al. also found that among workers who lost their jobs as a result of plant closings, only women reported significantly increased depression symptoms. Likewise, Mandal and Roe, using the same population as Brand et al. but with different methods and an updated data set, reported that women were more distressed by any job loss than were men. Many other studies report no heterogeneity between men and women in analyses of the effect of job loss on psychological distress or of the effect of depressive symptoms on subsequent employment status. Depressed men may also encounter more intense selection processes than do depressed women, forcing them to depart more frequently from or remainout of the labor force.
Age has also been suggested as an important factor in the relation between employment status and mental health. As reviewed by Breslin and Mustard, cross-sectional data indicate that psychological distress brought on by job loss may be worse in middle-aged and older adults than in young adults, perhaps due to the more serious financial and family responsibilities borne by older workers. Using longitudinal data, Breslin and Mustard found support for this hypothesis, reporting that becoming unemployed was associated with significantly higher distress levels and borderline significant levels of clinical depression among older adults. No relation was found among young adults. A few studies have found that young adults (generally in school-leaver samples) did not experience increased risk of depression symptoms with unemployment, but others have found that becoming unemployed significantly predicted symptoms in young people . Longitudinal studies of older adults have consistently reported that losing a job increases risk for psychological distress.
Lastly, a few studies have examined whether race interacts with the economy– depression relation. Both African-Americans and Hispanics have lower rates of depression and most anxiety disorders compared to whites but are more likely to be unemployed and to occupy low-paying positions. Catalano et al. found that Mexican-Americans in a Fresno, California sample were significantly more likely to be clinically depressed after losing a job, while Rodriguez, Allen, Frongillo, and Chandra reported that current unemployment was not related to depression in African-Americans, after controlling for previous depression. The relation was significant in whites.
Exposure characteristics. Although involuntary job loss is the most widely recognized form of adverse employment change, persons with unstable or inadequate employment (involuntary part-time or underpaid employment) make up an increasingly large percentage of the workforce and may also be at risk for psychological distress. Generally, studies have reported that the levels of psychological distress associated with unstable/inadequate employment lie somewhere between those linked with satisfactory employment and unemployment. Dooley, Prause, and Ham-Rowbottom, who conducted some of the earliest work in this area using the National Longitudinal Survey of Youth (NLSY) sample, reported that shifting from stable employment to inadequate employment predicted a similar level of significantly increased risk for depression symptoms (b = 0.67) as did losing a job (b = 0.84), even controlling for mediating variables and previous depression. Likewise, Bjarnason and Sigurdardottir reported that moving beyond unemployment to secure employment was associated with significantly less psychological distress, while moving to temporary employment was associated with an intermediate level of distress. Using the British Whitehall cohort, researchers found that insecure re-employment after job loss predicted increased psychiatric distress (OR = 1.4), albeit to a lesser extent than did unemployment (OR = 2.2). Exposure to chronic job insecurity is often associated with the worst psychiatric outcomes. In a sample of unemployed NLSY adults, however, having found any kind of employment—adequate or inadequate—by a subsequent survey wave was associated with less depression. Re-employment has been shown to significantly reduce depression symptoms in a number of other studies as well, including in a series of studies using a randomized controlled jobs training intervention program. Such evidence suggests that, in general, inadequate or insecure employment is detrimental to mental health but that having any kind of employment is protective compared to the significantly increased risk associated with job loss.
Length of unemployment has proven to be a less consistent factor in predicting depression symptoms. Any additive effects observed in the long-term unemployed may result in part from confounding by health selection, as trait characteristics predisposing an individual to depression would be expected to influence persistently labor market engagement. Alternatively, financial strain and other stressors intensify with duration of unemployment, potentially increasing stress-related depressive symptoms. One study of British men reported that after excluding men with a measure of preexisting depression tendencies from the sample, accumulated unemployment remained a statistically significant risk factor for symptoms of anxiety and depression (risk ratio [RR] = 1.63), although recent unemployment was associated with the highest risk (RR = 2.10). In a recent meta-analysis, McKee-Ryan, Song, Wanberg, and Kinicki found that the long-term unemployed had much lower levels of well-being than did the short-term unemployed. However, some researchers have found no relation between length of unemployment and depression symptoms, while others found a protective effect of long-term unemployment, at least among white men. Such findings may reflect the positive response or eventual psychological adaptation to unemployment in a subset of the population.
Most studies exploring the differential effects of distinct types of job displacement (layoffs vs. plant closings) have restricted their analyses to economic or somatic outcomes or have lacked appropriate control groups, undermining the validity of their conclusions. As discussed previous,
Brand et al. examined the effects of these two job displacement types using the Health and Retirement Survey and found strong effect modification by sex. The conflicting theoretical rationales and paucity of empirical data on this relation encourage further research in the area.
Ecological-Level Studies
The dearth of ecological analyses is unfortunate, as it constrains the strength of conclusions drawn from research on depression and economic contraction. Several studies of this type were conducted prior to 1990; some found that economic conditions did not predict depressive symptoms—either directly or through increased stressful life events—and others reporting that economic contraction did predict symptoms of psychological distress. Such inconsistencies and the general lack of empirical data call out for further research investigation. The metrics used in measuring depression, however, preclude ecological analyses of the effects on incidence in the general population, as treated disorder is only measured at the aggregate level. The “net effect” of economic contraction on depression symptoms remains unknown at this point.
Conclusions and Limitations
Evidence from the individual-level literature strongly indicates that economic contraction increases risk for psychological distress, specifically symptoms of depression. While not consistent in all groups across all exposure types, losing a job or transitioning to employment in an insecure job appears to increase depressed mood at twice the rate experienced by those remaining stably employed. This effect is remarkably robust across dozens of studies. Nevertheless, the magnitude of the effect is moderate, and many studies’ estimates are undoubtedly inflated by unmeasured reverse causation processes. The possibility also exists that a subset of the population with predisposition to psychological problems is responsible for much of the observed effect, a hypothesis generally untested.
We offer several additional caveats about findings from the individual-level literature on depression/anxiety. Most surveys necessarily entail long time intervals between survey waves, often of two years. As previously noted, this risks misclassification of depression episodes as resulting from, rather than causing, job loss. Nearly 20 percent of depressive episodes last longer than 24 months and close to 40 percent longer than 6 months; more severe episodes are more likely to precipitate job termination. It is also possible that the intervals result in underestimates
of the effect of job losses unrelated to health, if short-term depressive episodes are missed. Lastly, control for mediating factors varies widely among studies, and the literature offers no consensus on which mechanisms are primarily responsible for the pathway between economic contraction and depression.
Individual-Level Studies
Research at the individual level has converged on the finding that economic contraction poses a significant risk for depression symptoms. Analyzing two large longitudinal surveys, Burgard, Brand, and House used self-reported data on the reasons for job losses, as well as the timing of the job losses and acute negative health events, to discriminate between health-related job losses and other involuntary job losses. They showed that losing a job for reasons unrelated to health significantly increased participants’ risk for depressive symptoms even after controlling for labor
force experience, mental ability, and socioeconomic variables. In a smaller scale study using a sample of Mexican-Americans, Catalano, Aldrete, Vega, Kolody, and Aguilar-Gaxiola found that odds of suffering a first-ever episode of clinical depression in the six months before the survey was more than five times higher (odds ratio [OR] = 5.7) among those who had lost jobs 7 to 12 months before the survey. Several other studies have also found evidence of increased depression and anxiety symptoms resulting from job loss, with ORs averaging somewhat under 2.0, even after controlling for mental health status at previous survey waves.
However, without detailed information about the chronology of symptoms and unemployment,
these researchers could not rule out the possibility that an unmeasured intrawave onset of depression or underlying vulnerability to mood disorder caused the subsequent job loss. While all of these studies did reaffirm previous evidence that reverse causation is an important factor in shaping labor market engagement, the consistency of their support for a causal relation between economic contraction and depression is noteworthy.
A variety of more specific permutations of the economy–depression relation have also been investigated. Some researchers have focused on how one type of economic change (usually job loss) might affect different subgroups, such as men versus women. We designate this type of study as population characteristics research. Another group of researchers have focused on how different types of economic exposures, such as layoffs versus plant closings, might affect a population. We designate this type of study exposure characteristics research.
Population characteristics. Many of the early studies in this literature focused on men, as the researchers were assessing the effects of job losses or layoffs among blue-collar factory workers, who were chiefly male. However, women are far more likely to be diagnosed with depression in the general population, and researchers have noted the value of understanding whether job loss affects men and women differently. Many studies either statistically control for sex, restrict their
analyses to either men or women, or do not examine sex differences even when possible, apparently assuming that sex is a confounder without testing to determine whether it does, in fact, confound the results. However, results from several studies indicate that sex can act as an effect modifier on the effect of economic adversity.
Some authors have found evidence that men are more psychologically affected by job loss than are women. Brand et al. found that men but not women were significantly more likely to report depression as a result of being laid off. These authors suggested that differences in social and economic roles may explain this variation: Men may have more attachment to the labor force and greater psychosocial needs for re-employment, particularly as they approach retirement, than do older women. However, the impact of sex appears to be inconsistent. Brand et al. also found that among workers who lost their jobs as a result of plant closings, only women reported significantly increased depression symptoms. Likewise, Mandal and Roe, using the same population as Brand et al. but with different methods and an updated data set, reported that women were more distressed by any job loss than were men. Many other studies report no heterogeneity between men and women in analyses of the effect of job loss on psychological distress or of the effect of depressive symptoms on subsequent employment status. Depressed men may also encounter more intense selection processes than do depressed women, forcing them to depart more frequently from or remainout of the labor force.
Age has also been suggested as an important factor in the relation between employment status and mental health. As reviewed by Breslin and Mustard, cross-sectional data indicate that psychological distress brought on by job loss may be worse in middle-aged and older adults than in young adults, perhaps due to the more serious financial and family responsibilities borne by older workers. Using longitudinal data, Breslin and Mustard found support for this hypothesis, reporting that becoming unemployed was associated with significantly higher distress levels and borderline significant levels of clinical depression among older adults. No relation was found among young adults. A few studies have found that young adults (generally in school-leaver samples) did not experience increased risk of depression symptoms with unemployment, but others have found that becoming unemployed significantly predicted symptoms in young people . Longitudinal studies of older adults have consistently reported that losing a job increases risk for psychological distress.
Lastly, a few studies have examined whether race interacts with the economy– depression relation. Both African-Americans and Hispanics have lower rates of depression and most anxiety disorders compared to whites but are more likely to be unemployed and to occupy low-paying positions. Catalano et al. found that Mexican-Americans in a Fresno, California sample were significantly more likely to be clinically depressed after losing a job, while Rodriguez, Allen, Frongillo, and Chandra reported that current unemployment was not related to depression in African-Americans, after controlling for previous depression. The relation was significant in whites.
Exposure characteristics. Although involuntary job loss is the most widely recognized form of adverse employment change, persons with unstable or inadequate employment (involuntary part-time or underpaid employment) make up an increasingly large percentage of the workforce and may also be at risk for psychological distress. Generally, studies have reported that the levels of psychological distress associated with unstable/inadequate employment lie somewhere between those linked with satisfactory employment and unemployment. Dooley, Prause, and Ham-Rowbottom, who conducted some of the earliest work in this area using the National Longitudinal Survey of Youth (NLSY) sample, reported that shifting from stable employment to inadequate employment predicted a similar level of significantly increased risk for depression symptoms (b = 0.67) as did losing a job (b = 0.84), even controlling for mediating variables and previous depression. Likewise, Bjarnason and Sigurdardottir reported that moving beyond unemployment to secure employment was associated with significantly less psychological distress, while moving to temporary employment was associated with an intermediate level of distress. Using the British Whitehall cohort, researchers found that insecure re-employment after job loss predicted increased psychiatric distress (OR = 1.4), albeit to a lesser extent than did unemployment (OR = 2.2). Exposure to chronic job insecurity is often associated with the worst psychiatric outcomes. In a sample of unemployed NLSY adults, however, having found any kind of employment—adequate or inadequate—by a subsequent survey wave was associated with less depression. Re-employment has been shown to significantly reduce depression symptoms in a number of other studies as well, including in a series of studies using a randomized controlled jobs training intervention program. Such evidence suggests that, in general, inadequate or insecure employment is detrimental to mental health but that having any kind of employment is protective compared to the significantly increased risk associated with job loss.
Length of unemployment has proven to be a less consistent factor in predicting depression symptoms. Any additive effects observed in the long-term unemployed may result in part from confounding by health selection, as trait characteristics predisposing an individual to depression would be expected to influence persistently labor market engagement. Alternatively, financial strain and other stressors intensify with duration of unemployment, potentially increasing stress-related depressive symptoms. One study of British men reported that after excluding men with a measure of preexisting depression tendencies from the sample, accumulated unemployment remained a statistically significant risk factor for symptoms of anxiety and depression (risk ratio [RR] = 1.63), although recent unemployment was associated with the highest risk (RR = 2.10). In a recent meta-analysis, McKee-Ryan, Song, Wanberg, and Kinicki found that the long-term unemployed had much lower levels of well-being than did the short-term unemployed. However, some researchers have found no relation between length of unemployment and depression symptoms, while others found a protective effect of long-term unemployment, at least among white men. Such findings may reflect the positive response or eventual psychological adaptation to unemployment in a subset of the population.
Most studies exploring the differential effects of distinct types of job displacement (layoffs vs. plant closings) have restricted their analyses to economic or somatic outcomes or have lacked appropriate control groups, undermining the validity of their conclusions. As discussed previous,
Brand et al. examined the effects of these two job displacement types using the Health and Retirement Survey and found strong effect modification by sex. The conflicting theoretical rationales and paucity of empirical data on this relation encourage further research in the area.
Ecological-Level Studies
The dearth of ecological analyses is unfortunate, as it constrains the strength of conclusions drawn from research on depression and economic contraction. Several studies of this type were conducted prior to 1990; some found that economic conditions did not predict depressive symptoms—either directly or through increased stressful life events—and others reporting that economic contraction did predict symptoms of psychological distress. Such inconsistencies and the general lack of empirical data call out for further research investigation. The metrics used in measuring depression, however, preclude ecological analyses of the effects on incidence in the general population, as treated disorder is only measured at the aggregate level. The “net effect” of economic contraction on depression symptoms remains unknown at this point.
Conclusions and Limitations
Evidence from the individual-level literature strongly indicates that economic contraction increases risk for psychological distress, specifically symptoms of depression. While not consistent in all groups across all exposure types, losing a job or transitioning to employment in an insecure job appears to increase depressed mood at twice the rate experienced by those remaining stably employed. This effect is remarkably robust across dozens of studies. Nevertheless, the magnitude of the effect is moderate, and many studies’ estimates are undoubtedly inflated by unmeasured reverse causation processes. The possibility also exists that a subset of the population with predisposition to psychological problems is responsible for much of the observed effect, a hypothesis generally untested.
We offer several additional caveats about findings from the individual-level literature on depression/anxiety. Most surveys necessarily entail long time intervals between survey waves, often of two years. As previously noted, this risks misclassification of depression episodes as resulting from, rather than causing, job loss. Nearly 20 percent of depressive episodes last longer than 24 months and close to 40 percent longer than 6 months; more severe episodes are more likely to precipitate job termination. It is also possible that the intervals result in underestimates
of the effect of job losses unrelated to health, if short-term depressive episodes are missed. Lastly, control for mediating factors varies widely among studies, and the literature offers no consensus on which mechanisms are primarily responsible for the pathway between economic contraction and depression.
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