Race, Unemployment, and Mental Health in the USA: What Can We Infer About the Psychological Cost of the Great Recession Across Racial Groups?

Social scientists from a range of disciplines have provided evidence of a connection between unemployment and mental health. However, researchers recognize that poor mental health can lead to joblessness, highlighting the challenge of generating an accurate estimate of the impact of unemployment on mental health. In addition, virtually all of these studies use either self-reported measures of mental health or broad measures of emotional well-being such as self-esteem or constructs of general emotional health which are less than ideal. A shortcoming in the literature is that scholars have yet to examine whether race effects the extent of the effect of unemployment on psychological distress. Unemployment might have a smaller impact on blacks, because they have a higher degree of resilience due to encountering a greater and more intense array of life challenges, or a larger impact because of the fear of the consequences of unemployment due to structural discrimination and fewer buffers such as wealth. This paper uses measures of mental health based on the DSM-IV and ICD-10 diagnostic manuals to offer estimates of the link between unemployment and psychological distress for whites and blacks. We directly consider the prior mental health background of individuals to address the problem of reverse causality bias that mars virtually all existing estimates of the link between mental health and unemployment. This also allows us to offer convincing evidence on the relative effect of unemployment on mental health across racial groups. The analysis uses data from the National Comorbidity Survey-Replication. We construct two subsamples, one composed of those with no previous identified bouts of poor mental health (resilient) and a second group containing individuals with a history of psychological distress (vulnerable). Resilient persons, relative to those with a history of suffering from psychological distress, should be less likely to suffer a bout of poor mental health leading to unemployment. In addition, the influence of other covariates is likely different for resilient versus vulnerable individuals. Thus, our contention is that estimates generated using the resilient subsample will be less prone to suffer from reverse causality bias, measurement error, and specification bias. Hence, these estimates will provide the most accurate gauge of the mental costs of unemployment across racial groups. Our findings reveal that among resilient persons the pernicious effect of short-term unemployment on psychological distress is significantly greater for blacks. Our findings, based on data from the recession that began in 2001, allow us to infer that the Great Recession had a more intense adverse mental health effect on members of the black community. Our results imply that policymakers should consider both the monetary and psychological costs of unemployment, as well as their racial implications, when formulating policy to address the effects of economic downturns.