Academic Articles Labor Economics

Mortality, Mass-Layoffs and Career Outcomes

A few weeks ago I was able to attend Till von Wachter’s presentation on his working paper “Mortality, Mass-Layoffs, and Career Outcomes: An Analysis using Administrative Data,” co-written with Daniel Sullivan. The authors investigated whether or not losing one’s job affects mortality rates.

There could be many reasons why losing one’s job may affect mortality. The first of which is that losing one’s job may reduce either short- or long-term income and it has been found that those with lower incomes have higher mortality. Secondly, the emotional stress which appears among those who have recently lost a job could adverse impact health. Finally, losing one’s job can lead to a loss of health insurance which may lead to a reduction in the quantity of medical care consumed by each individual.

The paper uses earnings records from Unemployment Insurance records in Pennsylvania between 1974 and 1991 which include data on the age, sex, earnings, and industry of the individual as well as firm identifiers. The researchers link this data with mortality information from the Social Security administration between 1974 and 2002. Only those workers who were fired due to a ‘mass-layoff’ (classified as “workers who left their employer at the same time that the employer experienced a 30% or larger decline in employment”) are examined in order to focus on job loss situations which are not due to individual on-the-job performance.

The authors find that job loss leads to a 15%-20% increase in the hazard rate of dying in the twenty years following the layoff. In other words, for the average displaced middle aged worker, the loss in life expectancy is about 1.5 years. The authors claim that two-thirds of this increase in mortality is directly due to a loss in income and the other one-third of the mortality increase is due to to other factors such as stress from losing the job or other career outcome factors.

This paper does have a few problems. First, is that it only examines individuals with at least six years of tenure at their employer, when they were fired. Limiting the sample in this way reduces the generalizability of the study. Also, since the data has no information on health insurance, the researchers can not test whether the loss of health insurance had an impact on health (since COBRA was passed in 1985, many of the individuals in the study likely lost their health insurance after the layoff). Further, the analysis takes place in a partial equilibrium setting. It is likely that mass layoffs in one firm will lead to either: 1) increases in hiring in other firms in the same industry, or 2) increases in hiring at firms in other industries. Thus, in a more general equilibrium analysis, job losses hurt some workers, but benefit others . Those workers who are hired at the other firms may experience a decrease in mortality. Long run evidence tends to show that Schumpeter’s concept of “creative destruction” has decreased average mortality for individuals all over the world due to rising living standards.