Extended unemployment benefits found to significantly affect workers’ physical and mental health

With the extension of the lockdown, there has been a general worry that persisting unemployment could lead to a surge in deaths of despair. This would largely be due to unemployment and loss of income contributing to alcohol and substance abuse as well as deteriorating mental health, which may lead to increased rates of suicide.

Health providers across the country have indeed seen a surge in calls for suicide attempts as well as mental health patients. This is all highly expected in terms of financial turmoil. There are of course programs set up in place to cushion financial loss from loss of unemployment, generally termed unemployment insurance (UI). UI benefits help individuals afford basic living expenses while looking for a job.

It is generally understood, however, that high and extended unemployment benefits contribute to high unemployment as well as long duration among unemployed people. As people stay longer out of the workforce, their skills may become obsolete or deteriorate making them less employable.

So, paradoxically, while unemployment benefits are beneficial in the short run, they stand to worsen the effects of unemployment on mental health by increasing the duration of unemployment. This is especially true for workers who get fulfillment and a sense of self from their job or being employed.

A recent NBER paper has documented the negative effects of extended unemployment on male workers in a study on Austrian workers.

When analyzing effects for male workers, we find that those marginally eligible for an additional 9 weeks of UI benefits are 41.7 percent more likely to experience a heart attack or stroke in the 9 months following unemployment and are 8.1 percent more likely to eventually file a disability claim as compared to marginally-ineligible unemployed male workers. This corresponds to approximately 700 additional hospitalizations for acute cardiac events following unemployment annually, and 610 more workers eventually filing for disability. Across gender, effects are largest for low-skill workers and workers with children.

In recent months the government has rushed to expand their unemployment benefit programs. The US federal program for example has provided $600 extra unemployment payout to individuals, a figure that some businesses in recovery cannot compete with if they wish to reemploy their workers. The US House of Representatives has passed a new stimulus bill that would extend these expanded benefits to July 2021. It is hard to quantify what the exact effects of passing this bill would be, one can always infer from all existing research showing the unintended negative effects of UI benefits on employment and subsequently mental health.