The Effect of Work Status and Working Conditions on Mental Health in Four OECD Countries

Article excerpt

This study aims to assess empirically whether being employed or returning to work is beneficial for all in terms of mental health, especially for those who already suffer from a longstanding illness or disability. We use longitudinal surveys from Australia, Canada, Switzerland and the UK to estimate panel data models that link decisions regarding labour market choices to health developments. To allow for state dependence of mental health, a dynamic panel model is used. The longitudinal analysis shows that non-employment generally is worse for mental health than working. The mental-health payoff to employment varies depending on the type of employment contract and working conditions. In particular, the mental health benefits for inactive individuals who obtain a non-standard job appear to be smaller than for those moving into standard employment arrangements, even after controlling for pre-existing mental health problems.

Keywords: Health; working conditions; models with panel data

JEL Classifications: 11; J81; C23


The past decade has seen growing concerns about mental health problems and about whether employment patterns or working conditions are contributing to a rise in mental illness among the working-age population. Mental illness is the second biggest category of occupational ill-health after muscular-skeletal problems (Weiler, 2006) and a growing share of European workers report suffering from stress and fatigue due to their jobs. In addition, exit from employment to disability benefits due to mental health problems has been increasing in a number of OECD countries (OECD, 2003). This has led to a discussion about the impact of changes in the structure of employment associated, for instance, with the diffusion of 'non-standard' employment and other new work patterns on work-related stress.

The aim of this article is to assess empirically how changes in labour market status and working conditions affect mental health. It is of particular policy relevance to understand whether being employed or returning to work has beneficial impacts on mental health for persons already suffering from a longstanding illness or disability. It is also important from a policy perspective to know whether these health effects differ for those moving into non-standard jobs. Section 1 surveys prior research showing that employment status and working conditions can have a significant effect on mental health. Section 2 discusses the data used and Section 3 presents the estimation methods. The final section presents the results of the empirical analysis.

I. The link between mental health and work

Little theoretical work exists in the economic literature on the link between working conditions and mental health. Most of the literature has concentrated on the detrimental effect of unemployment on mental health (Clark, 2003; Shields and Wheatley Price, 2005). While unemployment may affect health via income effects, there may also be large non-pecuniary costs which are interesting to evaluate to understand better how working conditions could affect mental health. Winkelman and Winkelman (1998) decompose the cost of both effects and conclude that pecuniary costs are small compared with the non-pecuniary costs. Non-pecuniary costs include, for instance, damage to an individual's self-esteem. Employment is expected to contribute to mental well-being by providing a set of psychosocial assets such as time structure, opportunities for social contact and for defining social identity (Jahoda, 1982), and unemployed persons are deprived of these opportunities.

Working conditions might also have a differential impact on such psychosocial aspects of work. Theoretical and empirical work from occupational health indicate indeed that attention should also be paid to the effect of psychosocial factors at work. Certain working conditions may contribute to stress and hence be detrimental to mental health. …