[We’re pleased to welcome Paul Devereux of University College Dublin. Paul recently published an article in ILR Review entitled “Losing Heart? The Effects of Job Displacement on Health” with co-authors Sandra E. Black of University of Texas, Austin and Kjell G. Salvanes of Norwegian School of Economics.]
The growth and decline of firms is a prevalent feature of market economies and it is important to understand the consequences for workers who are displaced. While a lot is known about earnings losses, less is understood about consequences for health. Norway provides an interesting laboratory in which to consider the effects of displacement on health because, due to the strong social safety net, the income losses from job displacement are much lower than in most other countries and so we can largely isolate the effects of stress and lower labor market participation. Job displacement increases stress, which is known to have negative effects on cardiovascular health, for instance through individual life-style changes (increased consumption of nicotine, alcohol and dietary changes), or changes in biological parameters (increase in cholesterol concentration and cortisol). Additionally, the lower employment rates post-displacement could have direct effects on health through affecting daily activities such as exercise or opportunities to smoke.
Consistent with our expectations of increased stress, we find that displaced workers are more likely to smoke than workers who maintain their employment. As a result, job displacement has a significant effect on markers for cardiovascular health. However, there is little evidence of effects of displacement on other measures of short-run health. Therefore, the results suggest that when the financial costs of displacement are very low, the health effects may also be muted. However, our smoking findings indicate that the psychic costs may still matter and may lead to unhealthy behaviors that are predicted to have adverse consequences on cardiovascular health in the long-run.
The abstract for the paper:
Job reallocation is considered a key characteristic of well-functioning labor markets, as more productive firms grow and less productive ones contract or close. Despite its potential benefits for the economy, however, costs that are borne by the displaced workers are significant. The authors study how job displacement in Norway affects cardiovascular health, using a sample of men and women who are predominantly in their early 40s. To do so, they merge survey data on health and health behaviors with register data on person and firm characteristics. The authors compare the health of displaced and non-displaced workers from five years before to seven years after displacement. Results show that job displacement leads to an increase in smoking behavior for both men and women but few other short-term health effects. These results are robust to a variety of specification checks.
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*Heart monitor image credited to brykmantra (CC)
Sandra E. Black holds the Audre and Bernard Rapoport Centennial Chair in Economics and Public Affairs and is a Professor of Economics. She received her B.A. from UC Berkeley and her Ph.D. in Economics from Harvard University. Since that time, she worked as an Economist at the Federal Reserve Bank of New York, and an Assistant, Associate, and ultimately Professor in the Department of Economics at UCLA before arriving at the University of Texas, Austin in 2010. She currently is the Editor of the Journal of Human Resources, a Research Associate at the National Bureau of Economic Research (NBER), and a Research Affiliate at IZA. Her research focuses on the role of early life experiences on the long-run outcomes of children, as well as issues of gender and discrimination. She is currently on leave to serve as a Member of the President’s Council of Economic Advisers.
Kjell G. Salvanes is a Professor at the Norwegian School of Economics. He is Joint Managing Editor for The Economic Journal, as well as a research fellow with CEPR, Statistic Norway and director of Center for Empirical Labor Economics (CELE). His work has been published in journals like Journal of Political Economy, Journal of Labor Economics, Journal of Public Economics, Journal of the European Economic Association and Review of Economics and Statistics.
Paul J. Devereux is a Professor at the School of Economics, University College Dublin. Dr. Devereux did his PhD at Northwestern University and worked at UCLA before moving to UCD in 2005.