Job loss, retirement and the mental health of older Americans.

BACKGROUND Millions of older individuals cope with physical limitations, cognitive changes, and various losses such as bereavement that are commonly associated with aging. Given increased vulnerability to various health problems during aging, work displacement might exacerbate these due to additional distress and to possible changes in medical coverage. Older Americans are of increasing interest to researchers and policymakers due to the sheer size of the Baby Boom cohort, which is approaching retirement age, and due to the general decline in job security in the U.S. labor market. AIMS OF THE STUDY This research compares and contrasts the effect of involuntary job loss and retirement on the mental health of older Americans. Furthermore, it examines the impact of re-employment on the depressive symptoms. METHODS There are two fundamental empirical challenges in isolating the effect of employment status on mental health. The first is to control for unobserved heterogeneity--all latent factors that could impact mental health so as to establish the correct magnitude of the effect of employment status. The second challenge is to verify the direction of causality. First difference models are used to control for latent effects and a two-stage least squares regression is used to account for reverse causality. RESULTS We find that involuntary job loss worsens mental health, and re-employment recaptures the past mental health status. Retirement is found to improve mental health of older Americans. DISCUSSION With the use of longitudinal data from the Health and Retirement Study surveys and the adoption of proper measures to control for the possibility of reverse causality, this study provides strong evidence of elevating depressive symptoms with involuntary job displacement even after controlling for other late-life events. Women suffer from greater distress levels than men after job loss due to business closure or lay-off. However, women also exhibit better psychological well-being than men following retirement. The present study is the first to report that the re-employment of involuntary job-loss sufferers leads to a recapturing of past mental health status. Additionally, we find that re-entering the labor force is psychologically beneficial to retirees as well. IMPLICATIONS FOR HEALTH CARE PROVISION It is well established that out-of-pocket expenditures on all forms of health care for seniors with self-diagnosed depression significantly exceeds expenditures for seniors with other common ailments such as hypertension and arthritis in the U.S. Thus, our research suggests that re-employment of older Americans displaced from the labor force will be cost-effective with regard to personal mental health outcomes. IMPLICATIONS FOR HEALTH POLICIES That re-employment of involuntary job loss sufferers leads to a recapturing of past mental health status illuminates one potential policy trade off - increased resources dedicated to job training and placement for older U.S. workers could reap benefits with regard to reduced private and public mental health expenditures. IMPLICATIONS FOR FURTHER RESEARCH Further research could more clearly assess the degree to which the mental health benefits of employment among older Americans would warrant the expansion of job training and employment programs aimed at this group.