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Primary Submission Category: Policy
The Buffering Effects of Generous Unemployment Benefits on the Association between Job Loss and Mental Health
Authors: Megan Reynolds, Ashley Fox,
Presenting Author: Megan Reynolds*
A substantial body of research demonstrates that job loss is strongly associated with declines in mental health. Several systematic reviews and meta-analyses of the literature have been written on this association (McKee-Ryan et al, 2005; Paul & Moser, 2009; Milner, Page, & LaMontagne, 2014; Virgolino et al, 2022; Gedikli, 2023; Picchio & Ubaldi, 2024; Sterud et al 2025). Overall, studies show higher levels of depressive symptoms, anxiety, and psychosomatic complaints among unemployed individuals compared to the employed (Paul & Moser, 2009). Two central debates concern whether the relationship reflects a causal effect of job loss on mental health or whether this relationship reflects reverse causality (people with mental illness being more likely to lose jobs) and what mechanisms and contexts moderate this association (Agerbo et al, 2010). Quasi-experimental studies using plant closures, mass layoffs, and administrative records have largely resolved that there is a causal effect of job loss on mental health. For example, Sullivan and von Wachter (2009) showed that U.S. workers displaced by plant closings faced increased mortality risks, especially from suicide and stress-related conditions, persisting for decades. Similarly, research links job loss to greater use of psychotropic medication, higher rates of hospital admissions, and persistent depressive symptoms (Brand, 2015). These studies underscore that job loss is not merely an economic event but a profound health shock. Several mechanisms explain this relationship. The most direct is financial strain: unemployment reduces income, increases debt risk, and limits access to health care (Price, Choi, Vinokur, 2002). Work also provides social integration, daily structure, and personal identity; its loss can lead to isolation, reduced self-esteem, and chronic stress (McKee-Ryan et al, 2005). Repeated failed job searches amplify uncertainty and can foster hopelessness (Price et al, 2002).
With regard to the question of mechanisms and contexts that moderate the job loss-mental health association, significantly fewer studies examine potential buffers against the negative impacts of unemployment on mental health. Many of the studies that do exist investigate country-level difference in unemployment insurance (UI) and how modifies the effects of job loss on mental health. These cross-national comparisons show that generous UI, active labor market policies, and universal health care reduce the mental-health burden of job loss (Paul & Moser, 2009; Brand, 2015). Conversely, austerity measures and weak safety nets exacerbate the effects (Stuckler et al, 2009; Karanikolos et al, 2013).
There is smaller body of domestic research in the United States examining how UI receipt may moderate the effects of unemployment on substance use risk. Fox & Jeong (2023) find that receiving unemployment benefits reduced stress with no impact on substance use. Martins et al (2024) find that receipt of more generous unemployment benefits was associated with fewer fatal drug, opioid and stimulant overdoses in the pre-COVID-19 period and on fatal any drug and stimulant overdoses in the COVID-19 period. Two studies that did focus specifically on unemployment benefits as a moderator of mental health in the United States provide support for the notion that UI buffers against the adverse effects of job loss. One study found that receiving unemployment benefits does not bring recipients back up to the level of mental health full-time employment, but does buffer the negative impacts of job loss (Rodriguez et al, 1997). Another study found that receiving unemployment benefits does significantly alleviate the adverse health effects of unemployment among men (Cylus, Glymour, & Avendano, 2015).
Our study significantly advances the existing literature on the buffering impacts of UI by examining unemployment benefits along its intensive margin.