Unemployment has a lasting negative effect on mental health

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The drastic experience of becoming unemployed has a negative effect on mental health even years after finding new employment

Anyone who was unemployed carries the mental scars from this experience years after starting a new job. This is the conclusion reached by the Chair of Empirical Economic Sociology at FAU.

It is no surprise that unemployment has a detrimental effect on mental wellbeing, and this has long been scientifically proven to be the case. But how long do these ‘mental scars’ last? Until now, research findings have been inconclusive.

The FAU economic sociologists Dr. Andreas Eberl and Professor Dr. Tobias Wolbring have now looked into the issue in more detail together with Dr. Matthias Collischon (IAB), and the assistance of the Socio-Economic Panel (SOEP). The result: unemployment still has a negative effect on mental wellbeing as long as five years after starting a new job. Participants reported feeling less satisfied over all than before they became unemployed. Even those who were only unemployed for a short time. The lack of satisfaction was particularly driven by repeated periods of unemployment.

Germany: The stigma of unemployment

Eberl’s results are rather surprising. A comparable study from the USA did not find evidence for any lasting negative effects on mental health. As well as the methodology he chose, Eberl believes that the explanation for the different results may be the fact that unemployment is viewed differently in both countries. Whilst the ‘hire and fire’ culture in the USA leads to more flexible human resource policies, the law governing termination of employment in Germany is highly regulated, and unemployment carries a greater stigma.

What can be done to limit the negative effects of unemployment?

Based on the results, which recommendations can be made for the legislator? ‘An effort should definitely be made to avoid people losing their job and becoming unemployed. The government already has a good tool for avoiding this in their toolbox: short-time working,’ explains Andreas Eberl. ‘If someone is unemployed, the aim shouldn’t just be to get them back into employment as soon as possible. Instead, we should try to make sure that the new job is a good match and likely to offer long-term stability, avoiding new periods of unemployment that will only reinforce the negative effects.’

Further information

Dr. Andreas Eberl
Chair of Empirical Economic Sociology