The causal effect of mental health on labor market outcomes: The case of stress-related mental disorders following a human-made disaster

Abstract

As disasters increase due to climate change, population density, epidemics, and technology, information is needed about postdisaster consequences for people’s mental health and how stress-related mental disorders affect multiple spheres of life, including labor-market attachment. We tested the causal hypothesis that individuals who developed stress-related mental disorders as a consequence of their disaster exposure experienced subsequent weak labor-market attachment and poor work-related outcomes. We leveraged a natural experiment in an instrumental variables model, studying a 2004 fireworks factory explosion disaster that precipitated the onset of stress-related disorders (posttraumatic stress disorder, anxiety, and depression) among individuals in the local community (N = 86,726). We measured labor-market outcomes using longitudinal population-level administrative data: sick leave, unemployment benefits, early retirement pension, and income from wages from 2007 to 2010. We found that individuals who developed a stress-related disorder after the disaster were likely to go on sickness benefit, both in the short- and long-term, were likely to use unemployment benefits and to lose wage income in the long term. Stress-related disorders did not increase the likelihood of early retirement. The natural experiment design minimized the possibility that omitted confounders biased these effects of mental health on work outcomes. Addressing the mental health and employment needs of survivors after a traumatic experience may improve their labor-market outcomes and their nations’ economic outputs.