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Race, Unemployment, and Mental Health in the USA: What Can We Infer About the Psychological Cost of the Great Recession Across Racial Groups?


Social scientists from a range of disciplines have provided evidence of a connection between unemployment and mental health. However, researchers recognize that poor mental health can lead to joblessness, highlighting the challenge of generating an accurate estimate of the impact of unemployment on mental health. In addition, virtually all of these studies use either self-reported measures of mental health or broad measures of emotional well-being such as self-esteem or constructs of general emotional health which are less than ideal. A shortcoming in the literature is that scholars have yet to examine whether race effects the extent of the effect of unemployment on psychological distress. Unemployment might have a smaller impact on blacks, because they have a higher degree of resilience due to encountering a greater and more intense array of life challenges, or a larger impact because of the fear of the consequences of unemployment due to structural discrimination and fewer buffers such as wealth. This paper uses measures of mental health based on the DSM-IV and ICD-10 diagnostic manuals to offer estimates of the link between unemployment and psychological distress for whites and blacks. We directly consider the prior mental health background of individuals to address the problem of reverse causality bias that mars virtually all existing estimates of the link between mental health and unemployment. This also allows us to offer convincing evidence on the relative effect of unemployment on mental health across racial groups. The analysis uses data from the National Comorbidity Survey-Replication. We construct two subsamples, one composed of those with no previous identified bouts of poor mental health (resilient) and a second group containing individuals with a history of psychological distress (vulnerable). Resilient persons, relative to those with a history of suffering from psychological distress, should be less likely to suffer a bout of poor mental health leading to unemployment. In addition, the influence of other covariates is likely different for resilient versus vulnerable individuals. Thus, our contention is that estimates generated using the resilient subsample will be less prone to suffer from reverse causality bias, measurement error, and specification bias. Hence, these estimates will provide the most accurate gauge of the mental costs of unemployment across racial groups. Our findings reveal that among resilient persons the pernicious effect of short-term unemployment on psychological distress is significantly greater for blacks. Our findings, based on data from the recession that began in 2001, allow us to infer that the Great Recession had a more intense adverse mental health effect on members of the black community. Our results imply that policymakers should consider both the monetary and psychological costs of unemployment, as well as their racial implications, when formulating policy to address the effects of economic downturns.

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  1. For a discussion of the notion of greater resilience to traumatic experiences in the black community, see Macmillan and Hagan 2004.

  2. The American Life Panel, developed and administered by the RAND Corporation which contains panel data on 8000 individuals solicited over the internet, provides self-reported mental health appraisals along with labor force status. A number of studies find that self-reports of emotional well-being, when compared to records of health care for mental health disorders, are inaccurate (Nevin 2009). Since self-reports are commonly used by both health care practitioners and researchers, the National Institutes of Health (NIH) held an informative conference in 1997 entitled The Science of Self-Report: Implications for Research and Practice at which researchers and policymakers learned about many of the critical limits of “self-report” as a research tool. For an overview of the concerns discussed at the conference, see Garcia and Gustavson (1997).

  3. For a review of the sociology and psychology literature predicting a link between emotional health and unemployment, see (Goldsmith and Diette 2012).

  4. For a review of the empirical literature in the field of psychology documenting an association between unemployment and mental heal, see McKee-Ryan et al. (2005) and Paul and Moser (2005).

  5. See Darity (2001, 2005), Agesa and Hamilton (2004), and Darity et al. (2015) for a detailed discussion of stratification economics.

  6. This framework also fosters insights about the consequences of unemployment within racial groups. For instance, Diette et al. (2015) use this paradigm to advance the notion that unemployment is more problematic for blacks with dark skin shades. In addition, they provide evidence consistent with this hypothesis.

  7. The most recent round of the Survey of Consumer Finance (SCF) indicates that the median white family has nearly 10 times the wealth of the median black family (based on Dettling et al. 2017). Moreover, Hamilton et al. (2015) find that black families in which the head is unemployed typically have no assets—zero wealth—to deal with their financial calamity. Indeed, a narrative of a reliance on work, not assets, even for black professionals is a resounding theme that emerges from interviews probing how blacks in the USA understand their financial position (Jackson et al. 2015).

  8. See Catalano et al. (2000) for a test of the notion that Mexican Americans are more resilient to the adverse emotional consequences of unemployment than other groups.

  9. The designers of the NCS-R sought to limit false reporting of mental health, current and prior, by asking screener questions early in the survey that flagged persons with a potential mental health problem. Then, later in the survey, they go back and ask the set of questions to gauge each of the forms of mental health. The idea is that by asking the mental health question well after the questions about labor force status, which if in close proximity might prompt inaccurate responses, yields accurate responses about mental health.

  10. When analyzing retrospective information on unemployment, justification bias is always a concern. In the approach adopted by Kessler et al. (1988), they ask all respondents whether they contributed to becoming unemployed. If individuals indicate they are responsible then they are not included in the analysis sample. However, it is possible that persons who have prior histories of poor mental health—in our language vulnerable persons—who contributed to their unemployment may falsely report that “they are not responsible” for their unemployment. By shifting the blame to an external source, they are justifying their situation. Therefore, in this case, their estimates using the “not responsible subsample”—parallel to our notion of resilient—will suffer from reverse causality bias due to justification bias. We contend this is less likely to occur when a structured diagnosis of mental health history is used to separate respondents into our preferred analysis sample, our resilient subsample.

  11. For a detailed breakdown of NCS-R respondents based on race and ethnicity, see Table 5.1 of Holzer and Copeland (2000).

  12. Retrospective age-of-onset reports were obtained in the WMH-CIDI using a series of questions, and a pace, designed to enhance recall accuracy. A detailed discussion of these issues and how the NCS-R was designed and administered to address these concerns is provided in the “NCS-R screener notes to all users” and in (Kessler et al. 2005a, b).

  13. For a detailed discussion of this instrument, see First et al. (2002).

  14. Excluded observations include those who are retired, homemakers, in school, and physically or mentally unable to work.

  15. For evidence on the standard definition of shor-run unemployment adlopted by the U.S. government see

  16. The NCS-R data do not provide information on how many separate bouts of unemployment a person has experienced over the past year.

  17. Researchers have found that unemployment can foster poor mental health through a number of channels; these represent the primary pathways. For instance, Seligman (1975) demonstrates how unemployment can generate a sense of helplessness leading to depression, while Kessler et al. (1988) discuss how unemployment can foster insecurity leading to anxiety. Moreover, unemployment also can be a traumatic event that is so salient that the moment of onset and subsequent impacts and fears are revisited regularly, leading to post traumatic stress disorder (Nandi et al. 2004).

  18. Each of the more than 300 professional interviewers employed by the Institute for Social Research at the University of Michigan who participated in the data collection process received 7 days of study-specific training and successfully completed two practice interviews before beginning their assignment. For instance, the Major Depressive Episode (MDE) module consists of 19 items. Each of these items can contain multiple questions that assess hallmark symptoms of depression, including persistent feelings of sadness as well as loss of interest or pleasure in life.

  19. The Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition (DSM-IV) uses 16 spheres to gauge mental health while the International Classification of Diseases (ICD-10) evaluates mental well-being in 10 areas. Using either of these criteria frameworks, a clinical-like diagnosis on a zero to one scale is made indicating whether or not the person suffers from the condition.

  20. There is evidence of good concordance (Kessler et al. 2005a, b) between this clinical-like diagnosis and actual diagnosis of the same respondents made by experienced clinical psychologists using a structured clinical interview. See First et al. (2002) for a detailed discussion of the concordance between diagnosis made with the SCID by clinical psychologists and diagnosis generated by the WMH-CIDI using the DSM IV.

  21. In a review of the literature on mental health in the USA, Kessler and Wang (2008) assert that the main take-a-ways are that the prevalence of mental disorder in the USA is very high and most who suffer from poor mental health experience their first onset during childhood. For instance, analysis of the National Comorbidity Survey reveals that nearly 50% of the respondents reported at least one lifetime disorder (Kessler et al. 1994). Similarly, 46% of National Comorbidity Survey-Replication respondents had a history of at least one DSM-IV disorder. Moreover, analysis (Bourdon et al. 1992) of data from the Epidemiologic Catchment Area Survey, administered in five US cities, reveals that 33% of the participants had at least one mental disorder over the life course.

  22. The mean value of every variable is similar in the full sample and for both subsamples for whites and for blacks respectively. Examination of Table 6 reveals that the average respondent in the white sample, relative to the average respondent in the black sample, is more likely to have completed at least a high school education, is more likely to be married or cohabitating, was more likely to be raised by both biological parents, is more likely to have a mother—and a father—who completed at least a high school education, was less likely to grow up in a poor family, and was less likely to have been born in a foreign country.

  23. Individuals living in local communities with higher rates of unemployment may experience greater worries about keeping a job and finding a job once unemployed.

  24. In this study, we pool women and men because of the small number of blacks in the vulnerable and resilient subsamples; we were unable to run the analysis separately by gender groups or to interact the gender indicator with the unemployment indicators to investigate if the link between unemployment and psychological distress—for blacks and whites—varies across gender groups.

  25. Kessler et al. (2005b) offer evidence that respondents recall childhood experiences accurately, especially those that are traumatic, which suggests that recollection of traumatic adult events such as unemployment will not suffer from recall bias.

  26. Unemployed blacks also were significantly more likely to experience psychological distress than blacks who were not unemployed.

  27. While the interaction unemployment *black term is not significant (so the effect of unemployment on psychological distress for blacks is not statistically different from whites), the point estimate for unemployed blacks—relative to employed blacks—is different from zero (the unemployed are more likely to experience psychological distress) with a p value of 0.017.

  28. Relative to blacks who were employed throughout the past year, black who experiences short-term unemployment and those who experienced long-term unemployment, were more likely to suffer from psychological distress, with p values—respectively—of 0.025 and 1.00.

  29. Case and Deaton (2015) offer evidence of a steady decline from 1978 to 1998 in mortality rates in the USA for whites, blacks, and Hispanics. However, this trend reversed for white non-Hispanics in midlife (i.e., aged 45–54) between 1998 and 2013—especially for those with a high school degree or less. They attribute this rise in mortality to drug and alcohol poisoning, suicide, and chronic liver diseases—and speculate that these developments reflect despair due to deteriorating economic prospects. It could be inferred from the findings reported by Case and Deaton (2015) that whites, relative to blacks, suffered more from poor labor market opportunities due to the great recession. However, Hansen and Netherland (2016) make a compelling argument that—rather than whites suffering from more anxiety and disappointment than blacks—whites had greater access to opioids through superior medical insurance coverage and a greater propensity to interface with physicians who were inclined to prescribe opioids.

  30. However, it is still the case that relative to blacks who were employed throughout the past year, blacks who experience short-term unemployment and those who experienced long-term unemployment, were more like to suffer from psychological distress, with p values—respectively—of 0.074 and 0.055.


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Correspondence to Arthur H. Goldsmith.



Table 5 Definition of variables and associated summary statistics*
Table 6 Summary statistics
Table 7 Probit estimates for determinants of psychological distress: control variable results
Table 8 Probit estimates for impact of unemployment on psychological distress: summary long term unemployment as 26 or more weeks

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Diette, T.M., Goldsmith, A.H., Hamilton, D. et al. Race, Unemployment, and Mental Health in the USA: What Can We Infer About the Psychological Cost of the Great Recession Across Racial Groups?. J Econ Race Policy 1, 75–91 (2018).

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  • Race
  • Unemployment
  • Mental Health

JEL Codes

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  • E24
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