Economist Channel

Objective: This paper uses the National Longitudinal Study of Youth 1997 data to examine whether adolescent psychological distress in 2000 predicts higher unemployment over 2000–11, whether this relationship changed in the period following the Great Recession, and whether it is robust to adjustment for family effects.

Methods: 7125 cohort members (2986 siblings) self-reported their mental health in 2000 and employment activities over 2000–11. This association was examined using Probit and ordinary least squares regressions controlling for intelligence, physical health, other sociodemographic characteristics and family background.

Results: After adjustment for covariates and compared to those with low distress, highly distressed adolescents were 2.7 percentage points (32%) more likely to be unemployed, 5.1 points (26%) more likely to be unemployed or out of the labor force and experienced 11 weeks (28%) more unemployment. The impact of high distress was similar to a one standard deviation decrease in intelligence, and double the magnitude of having a serious physical health problem, and these estimates were robust to adjustment for family fixed-effects. The highly distressed were also disproportionately more likely to become unemployed or exit the labor force in the years following the Great Recession.

Conclusion: These findings provide strong evidence of the unemployment penalty of early-life psychological distress and suggest that this relationship may be intensified during economic recessions. Investing in mental health in early life may be an effective way to reduce unemployment.

Figure 1. Descriptive statistics (N = 7,125, unweighted) showing the labor force status of the cohort members over 2000-11 by levels of psychological distress (high = those scoring 1 SD and above on the mental health measure (13% of sample); low = remainder of sample) as measured in 2000: Employed is coded as 0 = Unemployed / Out of the labor force (OLF) 1 = Employed. Unemployed is coded as 0 = Employed, 1 = Unemployed. OLF is coded as 0 = Employed, 1 = OLF.

Figure 2. Predicted effects with 95% confidence intervals of high distress, a 1 standard deviation decrease in intelligence, and physical health problems (Phys. health) on the (a) probability of unemployment (b) probability of being unemployed or out of the labor force (UOLF), and (c) the number of weeks spent unemployed. Black/red bars indicate predicted effects prior to/after adjustment for sibling fixed effects.

Figure 3. Predicted probabilities with 95% confidence intervals of (a) unemployment and (b) unemployment or out of the labor force (UOLF) by levels of psychological distress (high = those scoring 1 SD and above on the mental health measure (13% of sample); low = remainder of sample) in the pre-recession (2006-08) and post-recession (2009-11) periods.