The psychological impact of unemployment is worse if you’re black

Higher burden.
Higher burden.
Image: Reuters/Lucy Nicholson
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The link between unemployment and mental health is receiving more attention, with research revealing that people who unexpectedly lose their jobs are more likely to suffer from depression or other impairments to their mental health. A new study suggests that, like many features of American economic life, the impact isn’t equal across races.

Short-term unemployment causes “significantly greater” psychological distress for black people, according to a new paper by economists at Washington and Lee University, The New School, and Duke, published in the Journal of Economics, Race, and Policy.

The economists looked at data during the 2001 recession, which lasted from March to November that year. It was a relatively shallow downturn, following the longest economic expansion on record. Nonetheless, by the end of 2001, the number of unemployed people in the US grew to 8 million, up by 2 million from the end of 2000. A consistent feature of the US labor market is that the black unemployment rate is usually about double that of white people. At the end of 2001, the black unemployment rate was 9.8%, up from 7.3% a year earlier. As the 2001 recession ended, the white unemployment rate was 4.9%, up from 3.4% a year earlier.

Other studies have shown that poor mental health can lead to joblessness. This study looked at people’s prior mental health using diagnoses rather than more commonly used self-reporting, attempting to strip out reverse causality and focus on how joblessness affects psychologically “resilient” people—those without a history of poor mental health.

“Resilient” black workers who experienced short-term unemployment—less than 16 weeks—were much more likely to suffer from psychological distress than white workers who experienced a similar period of unemployment. The impact over longer periods of unemployment was less pronounced.

The reason for the difference between short- and long-term unemployment is probably due to wealth, according to Randall Akee, a fellow at the Brookings Institute. Short spells of unemployment are likely more distressing if you don’t have a wealth buffer to fall back on. In the US, the typical white household’s wealth is 10 times larger than the average black household’s.

The average black household had a net wealth of just $17,600 in 2016, according to the Federal Reserve. Nearly 20% of black households had zero or negative net wealth, double the proportion of white households. Twice the share of black households also were behind on debt repayments by 60 days or more, or had been denied credit or feared being denied. This accumulation of debt creates a financial burden and reduces the ability for a person to get more credit to bridge a period of unemployment.

An additional source of anxiety could be the labor market discrimination that makes it harder for black people to find work, especially during an economic downturn.