Journal of Gerontology: SOCIAL SCIENCES Copyright 2000 by The Gerontological Society of America

2000, Vol. 55B, No. 3, S131–S140

Health Effects of Involuntary Job Loss Among

Older Workers:
Findings From the Health and Retirement Survey
William T. Gallo, Elizabeth H. Bradley, Michele Siegel, and Stanislav V. Kasl

Department of Epidemiology and Public Health, Yale University School of Medicine.

Objectives. To estimate the health consequences of involuntary job loss among older workers in the United States.

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Methods. Using longitudinal data from the 1992 and 1994 waves of the Health and Retirement Survey, multivariate
regression models were estimated to assess the impact of involuntary job loss on both physical functioning and mental
health. Our analysis sample included 209 workers who experienced involuntary job loss between survey dates and a
comparison group of 2,907 continuously employed workers.

Results. The effects of late-life involuntary job loss on both follow-up physical functioning and mental health were
negative and statistically significant (p ⬍ .05), even after baseline health status and sociodemographic factors were con-
trolled for. Among displaced workers, reemployment was positively associated with both follow-up physical function-
ing and mental health, whereas the duration of joblessness was not significantly associated with either outcome.

Discussion. The findings provide evidence of a causal relationship between job loss and morbidity among older
workers. This relationship is reflected in both poorer physical functioning and mental health for workers who experience
involuntary job loss. In addition to the economic consequences of worker displacement, there may be important health
consequences of job loss, especially among older workers.

I N the United States, downsizing led to more than 10 mil-

lion workers losing their jobs between 1989 and 1992
(Cascio, 1998). According to the United States Labor Depart-
ment, Bureau of Labor Statistics, 43 million jobs were elim-
inated between 1979 and 1995 (Uchitelle & Kleinfield,
1996). Although the overall rate of worker displacement has
not changed appreciably in the past two decades, the com-
position of those suffering job loss has shifted. Whereas dis-
placement was once concentrated among younger workers,
its incidence is now greatest among older workers (Couch,
1998; Farber, 1993). Findings such as these indicate that in-
voluntary job loss and workplace uncertainty are common ex-
periences for American workers, particularly older workers.
Although the economic impact of job displacement has been
widely studied, the potential health effects of job loss are less
well-understood, despite substantial research in this area.
Understanding the health consequences of job loss is im-
portant to discerning the complete impact of economic down-
turns, in which worker displacements are common, especially
among older workers. In addition, if involuntary job loss has
a deleterious effect on subsequent health, then appropriate
services for displaced workers can be designed to address an-
ticipated health needs during and after job separation.
There are a number of reasons why older U.S. workers
may be particularly vulnerable to health problems following
job loss. First, older workers commonly suffer longer job-
less spells than do younger workers (Swaim & Podgursky,
1991), forfeiting salaries and other benefits of permanent
employment. In addition, the skills of older workers may
not be transferable to new positions so that, frequently, dis-
placed older workers experience substantial earnings losses
in their postseparation employment (Carrington, 1993; Car-
rington & Zaman, 1994; Couch, 1998; Farber, 1993; Jacob-
son, LaLonde, & Sullivan 1993; Kletzer, 1989; Neal, 1995;
Ong & Mar, 1992; Ruhm, 1990, 1991). Finally, American
workers accumulate a significant proportion of the wealth
that will finance their retirements in the decade preceding re-
tirement (Mitchell & Moore, 1998). Involuntary job loss and
prolonged unemployment in this period may therefore have
a particularly devastating impact on economic well-being,
and consequently on emotional and physical well-being.
Existing literature on the health consequences of job loss
can be categorized into two classes of studies: cross-sec-
tional research and longitudinal analyses. Spurred by the
dramatic increase in unemployment in the 1970s and 1980s,
many cross-sectional studies have identified an association
between unemployment and various indicators of poor health,
including minor psychiatric morbidity, major affective dis-
orders, and a range of chronic physical health problems, as
well as mortality (Arber, 1987; Cook, Cummins, Bartley, &
Shaper, 1982; D’Arcy, 1986; D’Arcy & Siddique, 1985;
Kasl & Jones, in press; Mathers & Schofield, 1998). Although
these studies have provided reasonably consistent evidence
of an association between unemployment and poorer health,
they have frequently been unable to control adequately for
health status prior to job loss. Thus, these studies have not
clearly established whether those in poorer health are more
likely to lose their jobs or, conversely, whether job loss it-
self leads to poorer health, or both (Kasl & Jones, in press).
Longitudinal studies, which provide better methodology

S131
S132 GALLO ET AL.
for assessing the direction of causality, have become rea-
sonably common during the past decade. These studies have
generally shown that job loss has some negative impact on
physical health, although the nature of this impact is diffi-
cult to assess (Kasl & Jones, in press), given the diversity of
physical health measures considered and the sensitivity of
results to the measures used. With reasonable agreement,
however, the longitudinal studies have demonstrated a neg-
ative effect of job loss on a range of measures likely related
to physical health, including the number of reported medical
conditions, rates of medical services utilization, and pension
disability use (Ferrie, Shipley, Marmot, Stansfeld, & Smith,
1998; Hamilton, Broman, Hoffman, & Renner, 1990; Hamil-
ton, Hoffman, Broman, & Rauma, 1993; Kasl & Jones, in
press; Morris & Cook, 1991; Westin, 1990). In terms of
mental health, longitudinal data analysis has strongly sup-
ported the hypothesis that job loss has an adverse effect on
symptoms of poorer mental health (Brenner & Starrin, 1988;
Frese & Mohr, 1987; G.A. Kaplan, Roberts, Camacho, &
Coyne, 1987; Warr, Jackson, & Banks, 1988).
Studies of plant closings are potentially the best of the
longitudinal designs. Even so, limitations of these studies
have been described (Morris & Cook, 1991). The popula-
tions studied tend to be fairly homogeneous, generally male,
manual workers, and the control groups used for dislocated
workers (frequently displaced from a single plant) are often
not directly comparable because members of comparison
groups are commonly selected from a different plant. Exist-
ing studies of plant closings have involved small numbers
of subjects, and thus lack adequate statistical power to de-
tect significant effects. Further, the vast majority have been
conducted outside the United States, in Australia and the
United Kingdom. The one previous study to our knowledge
that used a national sample of American workers (Sorlie &
Rogot, 1990) focused on mortality, rather than physical mor-
bidity or mental health. Given the differences in social, eco-
nomic, and health programs, the observed effects of job loss
in other countries may not be generalizable to the United
States. Finally, we could find few studies that investigated the
effect of job loss on the health of older workers (Frese &
Mohr, 1987; Warr & Jackson, 1984, 1987; Warr et al., 1988).
The first of these studies (Frese & Mohr, 1987) was con-
ducted during 1975–1977 in Germany, and included 51
workers over 45 years of age all of whom lost their jobs,
with no control group. The authors reported increased de-
pression and reduced hope over time among workers in
their sample. However, the validity and generalizability of
the findings are limited by the study’s methodological
shortcomings.
The second set of these studies (Warr & Jackson, 1984,
1987; Warr et al., 1988) examined 954 men aged 16 to 64
years who were continuously unemployed for 25 months in
Britain. These studies found that, among continuously un-
employed men, the mental health effects of unemployment
vary in a curvilinear fashion with age. The youngest (aged
16–19 years) and oldest (aged 60–64 years) groups had sig-
nificantly better mental health than did the remaining groups.
Further, the middle groups (aged 20–59 years) showed sig-
nificantly less improvement over time in mental health than
did the younger or older groups (Warr & Jackson, 1987).
The authors suggest that the observed age-related variations
in responses to unemployment may be due to differing role
responsibilities throughout the life cycle. For instance, older
workers approaching retirement may have fewer financial
commitments and less family responsibility than do middle-
aged workers. Older workers may therefore face less pres-
sure to become reemployed, and may experience less stress
by remaining unemployed than younger workers (Warr et
al., 1988). Nonetheless, this investigation did not use a com-
parison group to contrast the unemployed men, which is
necessary to describe the effects of job loss itself.
Given the limited number of studies on older workers, the
health consequences of late-life job loss in the United States
remain largely unknown. The objective of this research is
therefore to estimate the health effects of involuntary job
loss among older workers in the United States, using longi-
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tudinal data on a nationally representative sample of older
Americans. This research examines the effect of involuntary
job loss on measures of both physical and mental health.
Unlike previous studies, this study includes an adequate
comparison group of older workers, and therefore, is able to
effectively control for baseline measures of physical func-
tioning and mental health.
METHODS
Study Design and Data Source
This is a longitudinal study using the first two waves
(1992 and 1994) of the Health and Retirement Survey
(HRS), a national, longitudinal survey designed to investi-
gate the experiences of older workers, with particular em-
phasis on health outcomes. These data have been termed
one of the most important sources for developing health
policy for elders in the United States (Burkhauser & Gertler,
1995).
Sample
HRS data are collected at 2-year intervals. At the base-
line (1992), HRS participants included 12,652 individuals
from 7,702 households (response rate ⫽ 82%). In-home,
face-to-face interviews were taken from a random sample
of individuals born between 1931 and 1941 (aged 51 to 61
years at the baseline interview) and their spouses. Blacks,
Hispanics, and Florida residents were oversampled. In 1994,
11,602 respondents from 7,093 households were reinter-
viewed by mail or telephone (response rate ⫽ 92.1%). HRS
data collection is conducted by the Institute for Social Re-
search at the University of Michigan. The primary funding
organization of the Survey is the National Institute on Aging.
For purposes of this analysis, the HRS sample was ini-
tially restricted to include all workers who were currently
working at the 1992 baseline survey and had been working
without interruption for at least 3 years with the same em-
ployer (n ⫽ 4792). By selecting individuals who had been
continuously employed, we hoped to eliminate workers
with less stable work histories. Such an approach is consis-
tent with prior studies of job loss (Couch, 1998; Jacobson et
al., 1993) and helps to reduce unobserved heterogeneity in
the sample that might be related to both future job loss and
future health status. Neglecting to account for such differ-
 HEALTH EFFECTS OF INVOLUNTARY JOB LOSS
ences could bias estimates of the effect of job loss on post-
separation health.
To construct the analysis sample, we created a continuous
monthly record of employment between interview dates for
the 4,792 workers eligible for the analysis, using retrospec-
tive data collected at the 1994 survey. We next investigated
employment information for workers with intervals of un-
employment. Respondents reporting job exit between sur-
vey dates due to plant closure or layoff were characterized
as experiencing involuntary job loss. Our sample was then
limited to workers who were either continuously employed
or had experienced involuntary job loss (n ⫽ 3939). Respon-
dents who reported job departures for other reasons (n ⫽
853) at the follow-up interview were excluded from the
analysis sample. Other reasons for job exit and their fre-
quencies were disability (n ⫽ 130), family reasons (n ⫽
16), better job (n ⫽ 42), quit (n ⫽ 82), and retirement (n ⫽
344). In addition, we excluded 239 respondents reporting a
temporary job exit. These were individuals who not only re-
ported working for their Wave 1 (1992) employer at follow-
up, but also reported some months of nonemployment be-
tween surveys. The subsample of retirees (n ⫽ 344) was
retained for sensitivity analysis.
Of the 3,939 possible participants, we eliminated 595 be-
cause of missing data, 96 self-employed individuals, and
132 age-ineligible spouses, leaving 3,116 individuals in our
analysis sample. In all, 209 of these workers experienced in-
voluntary job loss. The remaining 2,907 continuously em-
ployed individuals comprise our comparison group. Of the
209 workers who experienced involuntary job loss, 101
were reemployed by the time of the 1994 survey. Two of the
209 displaced workers in our analysis sample did not pro-
vide sufficient information for us to calculate the unemploy-
ment spell length. These two observations were not included in
the estimation of the effect of unemployment duration on
follow-up health.
To investigate whether there were systematic differences be-
tween respondents excluded because of missing data (n ⫽ 595)
and individuals in our analysis sample (n ⫽ 3116), we used
differences of group means and t tests. The results of these
analyses suggest that the respondents with missing data dif-
fered from the individuals in our analysis sample with re-
gard to a number of characteristics. Significant differences
(p ⬍ .05) were detected in race, occupation class, and base-
line health. Respondents with missing data were more likely
to be non-White, blue-collar, and in poorer physical and men-
tal health at the baseline than members of the analysis group.
All analyses were conducted using weighted data to cor-
rect for the HRS oversampling of relevant subgroups. Data
were weighted by the person-level analysis weight provided
by the HRS.
Dependent Variables
Physical functioning was measured using an index based
on responses to 15 performance-based, functional status
questions. These questions include self-reported perfor-
mance of Activities of Daily Living (ADLs) and mobility
tasks. Activities used to construct the physical functioning
index included the following: running or jogging a mile;
walking several blocks; walking one block; walking across
S133
a room; climbing several flights of stairs; climbing one
flight of stairs; getting up from a chair; getting in and out of
bed; bathing; dressing; eating; lifting or carrying over 10
pounds; stooping, kneeling or crouching; pulling or pushing
large objects; and extending arms above shoulders. Because
response options for these items varied between the baseline
and follow-up HRS interviews, comparable measurement of
the level of difficulty in performing each task was not possi-
ble unless items were dichotomized to identify respondents
with difficulty performing a particular activity (1 ⫽ respon-
dent reported having some difficulty; 0 ⫽ otherwise). Di-
chotomized values were summed to calculate a single
functioning score, ranging from 0 to 15, with higher values
reflecting poorer physical functioning.
Mental health was measured using a depression score
based on 8 items from the 20-item Center for Epidemiologi-
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cal Studies-Depression (CES-D) scale. Although the full
scale would be preferable, the HRS only includes these
eight items in both survey waves. We used all available
data. Of the eight CES-D items, six reflect the presence of
depression (in the last week, respondent felt depressed; felt
everything he or she did was an effort; experienced restless
sleep; “could not get going”; felt lonely; felt sad), and two
suggest its absence (in the last week, respondent enjoyed
life; was happy). For each of the former six statements, re-
sponses were dichotomized (the symptom was experienced
“much,” “most,” or “all” of the time vs. “little” or “none” of
the time). For the latter two statements, responses were re-
verse coded, yielding an index, ranging from 0 to 8, with
higher scores reflecting poorer mental health. Dichotomiz-
ing response categories was again necessary because only
two categories of response (symptom was experienced
“most” vs. “none” of the time) were used in the 1994 fol-
low-up survey.
We assessed the reliability of the 15-item physical func-
tioning score and the 8-item depression score using the
Cronbach alpha coefficient (Cronbach, 1951). Cronbach al-
pha coefficients for both baseline and follow-up physical
functioning scores were .74. For baseline and follow-up de-
pression scores, the Cronbach alpha coefficients were ad-
justed for the more limited test length of the CES-D
included in the HRS (8 questions vs. 20 questions in the
original CES-D) using the approach recommended by Nun-
nally (1967, p. 223). The adjusted coefficients were .82 and
.88, respectively. These are consistent with the alpha coeffi-
cients reported for the full CES-D in several previous stud-
ies (Radloff, 1977). In each case, the Cronbach values
suggest adequate internal consistency among the elements
comprising the dependent variable scales.
We used exploratory factor analysis to evaluate the factor
structure of our dependent variables. As our physical func-
tioning score consists of a combination of mobility tasks
and more traditional ADLs, our approach was first to ex-
plore the possibility that two distinct conceptual dimensions
existed within the 15-item score. We therefore computed
factor loadings using maximum likelihood estimation, con-
straining the number of factors to two. However, examina-
tion of factor loadings revealed no obvious factor structure.
Such was the case for both oblique and orthogonal factor
analyses. We then restricted the number of factors to one and
S134 GALLO ET AL.
reestimated the loadings. Factor loadings supported the
premise that the 15 items comprising the physical functioning
score are appropriately aggregated into a single dimension.
A similar procedure was followed to investigate the valid-
ity of the 8-item depression score. Once more we observed no
apparent factor structure from fitting the two-factor solution.
Such findings indicate one underlying concept present in the
depression score. This is not surprising when one considers
that the elements comprising our mental health measure were
drawn from a well-established empirical tool designed specif-
ically to measure the phenomenon of depression.
The use of a self-reported measure of physical functioning
and a depression battery, rather than a single, global measure
of self-assessed physical or mental health, as the basis for es-
timating health changes associated with job loss has empiri-
cal support. Numerous studies provide evidence that jobless
workers justify their labor market status by understating their
health in self-reports (see Chirikos, 1993). Hence, using self-
assessed health, rather than the more detailed measures used
in this study, could potentially result in an overstatement of
the impact of job loss in our empirical analysis. In addition,
it is less clear what the global assessment of health measures.
Given the interest in physical function and depression, using
scales designed to measure these more specific constructs,
rather than overall health, is appropriate.
Independent Variables
Independent variables were chosen based on previous lit-
erature suggesting their importance in the estimation of
physical disability and/or mental health and the primary re-
search question concerning involuntary job loss.
The primary independent variable of interest was a dummy
variable for involuntary job loss (i.e., job exit due to either
plant/company closing or layoff). The time component of
involuntary job loss was assessed using a continuous vari-
able that captured the months elapsed between job loss and
reemployment for the reemployed, and between job loss and
the follow-up survey date for workers not reemployed. For
analyses of the effects of reemployment on physical func-
tioning and mental health, a dummy variable for reemploy-
ment was used. Those workers reemployed included all
previously displaced workers who were working by the
time of the follow-up interview, whether the new position
was full-time or part-time.
Because baseline health was likely to be strongly associ-
ated with health 2 years later, we included as independent
variables a number of measures of baseline health. Baseline
physical functioning (in the regression estimating postloss
physical functioning) and baseline mental health (in the re-
gression estimating postloss mental health) were each in-
cluded as covariates. Although it is plausible that physical
functioning and mental health may be related, we found no
evidence that baseline mental health predicted follow-up
physical functioning or that baseline physical function pre-
dicted follow-up mental health. Therefore, we did not include
baseline mental health in the estimation of physical function-
ing; nor did we include baseline physical functioning in the
estimation of follow-up mental health. Their removal from
the respective models did not materially change the parame-
ter estimates on the remaining independent variables.
In addition to baseline physical functioning, a number of
other baseline physical health measures known from previ-
ous literature to be predictive of various health outcomes,
including physical functioning, were included in the models
of post-loss physical functioning. This set of covariates in-
cluded (a) obesity, which was determined as a body mass
index of at least 30, the most recent criterion for obesity in
this age group (Flegal, Carroll, Kuczmarski, & Johnson,
1998), (b) whether a physician had ever told the respondent
that he or she had high blood pressure or hypertension, heart
disease, or cancer or a malignant tumor, (c) heavy smoking
(at least 20 cigarettes per day), and (d) heavy drinking (at
least 3 drinks per day). The effect of these covariates on
mental health is less clear from previous literature. In addi-
tion, these covariates were not associated with follow-up
mental health in this sample; their removal from the mental
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health estimation model did not materially change the pa-
rameter estimates on the remaining independent variables,
so for both theoretical and empirical reasons, they were not
included in the models of follow-up mental health.
We also selected several socioeconomic variables as co-
variates in our empirical models. Their selection was based
on a large body of literature from medical sociology demon-
strating the influence of socioeconomic factors on health
(H.B. Kaplan, 1989; Link & Dohrenwend, 1989). The so-
cioeconomic variables included age, gender, years of educa-
tion, race (White vs. non-White), marital status (married vs.
unmarried), occupation class (blue collar vs. white collar),
income, and assets. Blue-collar occupations included farm-
ing, forestry, and fishing; production and operations; and
the military. White-collar occupations included managerial
and professional, sales, clerical, administrative, and service
occupations. Income included pretax individual labor earn-
ings for 1991. Assets included household nonhousing asset
amounts reported by respondents at the 1992 survey. Non-
housing assets included 1992 values of checking and savings
accounts; certificates of deposit, bonds, and Treasury bills;
individual retirement accounts; stock and mutual funds;
business equity; equity in real estate other than respondent’s
primary assets; and other reported nonhousing assets. Con-
tinuous predictor variables were dichotomized in the bivari-
ate analyses.
Estimation Model and Empirical Approach
We observe health for all workers in our analysis sample at
two fixed points in time, t and t⫹k. Let s represent the time at
which a subset of the workers observed at time t suffer invol-
untary job loss, and let us restrict s so that t ⬍ s ⬍ t ⫹ k. This
restriction implies that job loss occurs between the two
points in time at which we observe health. We estimate the
effect of job loss on health for worker i at time t⫹k with the
following equation:
H i,t + k = α + β 0 H i ,t + β 1 Z i ,t + γ d i + ε i ,t + k (1)
where H is an index of either physical or mental health; Z is
a vector of personal attributes measured at the date of the
1992 (baseline) survey; d is a dichotomous dummy variable
defined to take the value 1 if t ⬍ s ⬍ t ⫹ k, and 0 otherwise;
and ⑀ is a stochastic error term. The parameter estimate de-
noted by ␥ captures the average effect of job loss for work-
 HEALTH EFFECTS OF INVOLUNTARY JOB LOSS
ers in the sample who experience involuntary job loss
relative to those who remain continuously employed.
We estimated Equation (1) using ordinary least squares
(OLS). As our data are longitudinal, the possibility of serial
correlation exists. We therefore tested for serial correlation,
calculating Durbin’s h statistic (Durbin, 1970), a modified
version of the Durbin–Watson statistic, that accounts for the
lagged dependent variables in our models. For the physical
functioning regression we find no evidence of serial correla-
tion. For the mental health regression, however, we may not
rule out serial correlation, as we were unable to calculate the h
statistic. (One element of the statistic involves a square root;
for mental health the number under the radical was negative.)
An alternative test is proposed by Durbin (1970), but requires a
second lag in the variables, which is not possible with two
waves of data. It should be noted that, even if the error co-
variance matrix displays autocorrelated errors, the effect of
such autocorrelation when only two waves of data are used
is typically very limited (Diggle, Liang, & Zeger, 1994).
Separate models were estimated to assess the effect of in-
voluntary job loss on postseparation physical functioning
and post-separation mental health. Consistent with Equation
(1), both models covaried the baseline value of the response
variable and included a vector of control variables in addi-
tion to the dummy variable for displacement.
Additional models were estimated to investigate the effects
of joblessness duration and of reemployment following in-
voluntary job loss on health measures at the follow-up inter-
view. We estimated these models using only respondents
who had reported involuntary job loss at some point during
the 2-year study period. In a first specification, a continuous
variable representing number of months unemployed was
substituted for the job loss dummy variable in Equation (1).
In the second specification, a dummy variable measuring re-
employment during the study period (1 ⫽ reemployed) re-
placed the dummy variable for involuntary job loss in
Equation (1). The reemployment and duration effects were
tested independently because of the dependence between
the unemployment spell length and reemployment. All other
covariates in these models were identical to those included
in the regressions for the full sample.
Sensitivity analyses comparing the health effects of re-
tirement with those of involuntary job loss were also per-
formed. In these analyses (results not shown), we added to
our full analysis sample (n ⫽ 3116) the individuals who re-
ported being retired at the follow-up interview (n ⫽ 344),
and indicated the inclusion of this subsample with an addi-
tional dummy variable. Equation (1) was then reestimated
with the dummy variable for retirement included as an inde-
pendent variable. The results were suggestive of a protec-
tive effect (not statistically significant) of retirement on both
physical functioning and mental health, consistent with the
findings of other studies that have explored the relationship
between retirement and health (Kasl & Jones, in press). Inclu-
sion of the dummy variable for retirement had virtually no ef-
fect on the estimated coefficient on involuntary job loss.
Although least squares regression with continuous out-
come variables was the technique we ultimately chose to es-
timate the models of health in this study, several other
procedures were considered. The reason for exploring such
S135
alternatives was that the dependent variables were some-
what nonnormally distributed (asymptotically declining).
Two alternative methods to estimate Equation (1) were
therefore investigated, each of which addressed the shape of
the outcome variable’s distributions.
First, we estimated a log-linear variant of the model,
transforming the dependent variables to their natural loga-
rithms (adding 1 to each value of the dependent variable to
avoid losing observations with 0 health scores) and estimat-
ing the model with OLS. Second, we estimated the model
with Poisson regression, a maximum likelihood technique
for estimating the likelihood of rare events (in this case,
physical disability or poorer mental health status). In both
cases, the results were not qualitatively different from the
reported estimation results using least squares estimation.
Another important issue considered in this analysis was
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the potential bias resulting from endogeneity of explanatory
variables. Endogeneity concerns derive from two sources:
(a) declines in health may lead to involuntary job loss, and
(b) unobserved factors that may be associated with both the
likelihood of involuntary job loss and follow-up health sta-
tus may have been omitted. Regardless of the source of this
potential endogeneity, the consequence could be a biased
estimate of the effect of job loss.
With regard to the first issue, we used a Hausman Speci-
fication Test (Hausman, 1978) to assess the possible endo-
geneity of involuntary job loss. This test was done separately
for physical functioning and mental health, and involved a
two-step process. In the first step, we regressed the dummy
variable for involuntary job loss on baseline health, all ex-
ogenous variables, and an instrumental variable, and calcu-
lated the residuals. The instrument chosen was the 1993
average weekly Unemployment Insurance (UI) benefit (U.S.
Department of Labor, 1993) in the geographical area in
which the worker resides. Ruhm (1994) has demonstrated
the efficacy of this instrument in an economic study of dis-
placement. The average weekly UI benefit was associated
with involuntary job loss ( p ⬍ .05), but not associated with
either physical functioning or mental health ( p ⬎ .05). In the
second step, we included the residuals calculated in the first
step as an additional regressor on the right-hand side of the
follow-up health regressions and considered the statistical
significance of the estimated coefficients on the residuals.
Our test results indicated that involuntary job loss is not en-
dogeneously determined ( p ⬎ .05).
To account for the second potential source of endogene-
ity, we carefully selected the analysis sample to eliminate
substantial sources of heterogeneity. In addition, we in-
cluded a comprehensive set of independent variables, in-
cluding reliable measures of baseline health.
RESULTS
Adjusting for oversampling, the study population had an
average age of 55 years. About 83% of sample members
were White, 53% were male, and about three quarters were
married. Average 1991 labor earnings were $32,789; mean
baseline nonhousing assets were $128,868. Sample mem-
bers averaged almost 13 years of schooling, and 27% of the
sample reported baseline employment in a blue-collar occu-
pation. Approximately 7% reported having experienced in-
S136 GALLO ET AL.

Table 1. Means of Selected Regression Variables (N ⫽ 3116) among workers suffering involuntary job loss, longer unem-
Unweighted Weighted
ployment spells are suggestive of poorer physical function-
ing and mental health at follow-up. However, the observed
Variable M SD M SD effect was not statistically significant ( p ⬎ .05). Reemploy-
Involuntary job loss 0.067 0.250 0.067 0.209 ment was positively associated with physical functioning
Duration of joblessness (months)a 8.591 6.850 8.590 5.599 and mental health at the follow-up interview ( p ⬍ .05). This
Age 55.365 2.986 55.437 2.514 result suggests that reemployment may be protective against
Education (number of years) 12.583 3.046 12.896 3.387 the declines in both physical functioning and mental health
Male 0.516 0.499 0.526 0.417
associated with remaining unemployed. However, when
White 0.738 0.439 0.836 0.309
Married 0.749 0.433 0.738 0.367
considering the reemployment result, the possibility of re-
Blue-collar 0.292 0.455 0.267 0.370 verse causality may not be eliminated, because physical
Labor income 30,832 26,125 32,789 23,151 functioning and mental health were not assessed after job
Nonhousing net worth 117,992 336,570 128,868 291,623 loss and before reemployment for workers who had lost
aAmong workers experiencing involuntary job loss.
their jobs between the baseline and follow-up interviews.

DISCUSSION

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voluntary job loss some time between the 1992 and 1994
interviews (Table 1). The mean value of the physical dis-
ability measure was 2.37 at baseline and 1.80 at follow-up.
The mean value of the mental health measure was 0.55 at
baseline and 0.99 at follow-up.
Bivariate analyses demonstrated an association between
involuntary job loss and both poorer postloss physical func-
tioning and poorer postloss mental health ( p ⬍ .05; Table
2). In addition, all other covariates except race, occupation
class, and heavy alcohol consumption were significantly as-
sociated with physical functioning ( p ⬍ .05), and all covari-
ates except older age were identified as being associated
with mental health ( p ⬍ .05). Because there is theoretical
justification for inclusion of the nonsignificant variables in
the multivariate models, these variables have been used in
our analyses.
Results of multivariate analyses further confirmed the asso-
ciation between involuntary job loss and both postloss phys-
ical functioning and mental health (Table 3). The adjusted
associations are negative and statistically significant ( p ⬍ .01),
controlling for baseline measures of health status and socio-
demographic factors. The sign and statistical significance of
the estimated coefficients indicate that job loss is associated
with poorer physical functioning and poorer mental health
following separation.
In addition to involuntary job loss, several other factors
were significantly associated with the health dimensions
considered. For the physical functioning regression, poorer
baseline physical functioning, several of the comorbidity
controls, and age were all negatively associated with fol-
low-up physical functioning ( p ⬍ .05). Education, being
male, and being married were positively associated with
physical functioning ( p ⬍ .01). For the mental health re-
gression, baseline mental health was negatively associated
with follow-up mental health, whereas education, being
White, and being married were positively associated with
mental health ( p ⬍ .01).
In Table 4, results of independent tests of workers who
reported involuntary job loss during the study period are
displayed. Once again, in these analyses we investigated
two concerns: whether either the unemployment spell length
or reemployment was associated with follow-up physical
functioning and mental health. The results indicate that,
This study is the first to examine the health consequences
of involuntary job loss using a nationally representative
sample of older workers in the United States. Our study also
used a comparison group of continuously employed older
workers and adequate measures of baseline health, features
lacking in many previous studies. The results suggest that
involuntary job loss is significantly associated with both
physical disability and poorer mental health among this
population.
Previous research has suggested that, at least for those
who are continuously unemployed, older individuals may
adapt better than younger individuals to unemployment,
perhaps due to reduced financial and family obligations of
such older individuals (Warr & Jackson, 1987; Warr et al.,
1988). Our findings, however, indicate that the negative
health effects of involuntary job loss are significant for
older workers. In the United States, workers save heavily in
the years immediately preceding retirement, often relying
primarily on personal savings amassed in this period to fi-
nance the costs of retirement (Mitchell & Moore, 1998). It
is therefore easy to imagine that late-stage job loss could
bear important consequences for the well-being of dislo-
cated U.S. workers.
It has been debated in previous literature on the health
consequences of job loss whether unemployment is a cause
or merely the result of poorer health (Kasl & Jones, in
press). The findings of this study suggest that the observed
effect of involuntary job loss on health includes a combina-
tion of selection and causality effects.
The selection interpretation (i.e., those who lose their
jobs are more likely to have had poorer health prior to the
job loss than those who do not lose their jobs, and thus, are
observed to have poorer postloss health) is evidenced by the
comparison of unadjusted and adjusted effects of job loss on
post-loss physical functioning. The unadjusted effect of in-
voluntary job loss on physical functioning was nearly dou-
ble the adjusted effect once we controlled for baseline
physical functioning, suggesting that the effect of involun-
tary job loss on post-loss physical functioning is due in part
to the poorer baseline health of workers who experienced
job loss. However, the magnitude of the association be-
tween baseline physical functioning and involuntary job
loss was small. Moreover, the effect of involuntary job loss
on physical functioning remains negative and significant
 HEALTH EFFECTS OF INVOLUNTARY JOB LOSS S137

Table 2. Unadjusted Associations Between Independent Variables and Health Measures ( N ⫽ 3116)
Physical function
score Mental health score

M SD t statistic p value M SD t statistic p value

Employment status
Involuntary job loss 2.325 0.138 ⫺4.087 0.000 1.540 0.112 ⫺5.293 0.000
Continuously employed 1.759 0.036 0.946 0.029
Age
55⫹ years 1.923 0.070 ⫺3.385 0.007 0.971 0.054 0.537 0.591
⬍55 years 1.686 0.048 1.001 0.039
Education
⬎High school 1.541 0.069 6.746 0.000 0.704 0.036 9.195 0.000
High school or less 2.013 0.047 1.223 0.038
Gender
Male 1.482 0.069 9.599 0.000 0.888 0.056 3.663 0.000
Female 2.147 0.050 1.096 0.041

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Race
White 1.797 0.095 ⫺0.034 0.973 0.899 0.076 6.803 0.000
Non-White 1.794 0.087 1.420 0.070
Marital status
Married 1.694 0.079 5.078 0.000 0.880 0.064 6.385 0.000
Not married 2.098 0.068 1.292 0.055
Occupation class
Blue-collar 1.817 0.079 0.335 0.737 1.194 0.064 ⫺4.429 0.000
White-collar 1.791 0.040 0.910 0.033
Income
High (ⱖ $25,000) 1.528 0.069 8.315 0.000 0.722 0.056 10.291 0.000
Low (⬍ $25,000) 2.108 0.051 1.299 0.041
Assets
High (ⱖ $38,750) 1.574 0.070 6.935 0.000 0.778 0.057 8.030 0.000
Low (⬍ $38,750) 2.060 0.051 1.234 0.041
Hypertension prevalence
Present at Wave 1 2.107 0.073 ⫺6.493 0.000 — — — —
Not present at Wave 1 1.632 0.044
Cancer prevalence
Present at Wave 1 2.314 0.161 ⫺3.363 0.000 — — — —
Not present at Wave 1 1.771 0.035
Heart disease prevalence
Present at Wave 1 2.451 0.116 ⫺6.210 0.000 — — — —
Not present at Wave 1 1.726 0.036
Cigarette consumption
Heavy (ⱖ1 pack/day) 2.085 0.098 ⫺3.423 0.000 — — — —
⬍1 pack or nonsmoker 1.748 0.037
Alcohol consumption
Heavy (ⱖ3 drinks/day) 1.945 0.163 ⫺0.945 0.344 — — — —
⬍3 drinks or nondrinker 1.791 0.035
Body mass index (BMI)
Obese (BMI ⱖ30) 2.626 0.085 ⫺12.042 0.000 — — — —
Not obese (BMI ⬍30) 1.592 0.038

even after we controlled for a comprehensive set of health,
sociodemographic, and economic factors that might account
for selection effects, suggesting that the observed associa-
tion is not due only to selection effects.
The evidence of the effect of involuntary job loss on
mental health is even more heavily weighted toward the
causality interpretation. The unadjusted and adjusted associ-
ations between involuntary job loss and post-loss mental
health are nearly identical, suggesting that the effect of job
loss on post-loss mental health is not due to poorer baseline
mental health among workers experiencing job loss. In ad-
dition, the association between baseline mental health and
involuntary job loss was small. Further, the effect of invol-
untary job loss on mental health remains substantial and sig-
nificant after we controlled for baseline measures of mental
health, and sociodemographic and economic factors, sug-
gesting again that the observed negative effects of involun-
tary job loss are not due only to selection effects.
Few previous studies have had rich enough data to assess
how the health effects of involuntary job loss may vary by
subgroups of respondents, an important factor in the plan-
ning of targeted interventions to buffer negative health ef-
fects. In analyses not shown, interaction models were
estimated to test subgroup differences in the health conse-
quences of involuntary job loss. Our results indicated that
both older and unmarried individuals may be especially vul-
S138 GALLO ET AL.

Table 3. Least Squares Regressions of Wave 2 Health: The Effect be significant for post-loss physical functioning, although
of Involuntary Job Loss (N ⫽ 3116) the interaction effect of marriage was in the expected (buff-
Physical functioning Mental health
ering) direction.
This research has also demonstrated that for displaced
Variable b (SE) b (SE) workers, reemployment is positively associated with post-
Intercept ⫺0.894 (0.558) 2.006*** (0.512) separation health. This was the case for both physical func-
Involuntary job loss 0.271** (0.111) 0.423*** (0.102) tioning and mental health. Our finding indicates that
Age 0.035*** (0.009) 0.001 (0.008) securing a new job may diminish the health impacts of job
Education ⫺0.032** (0.011) ⫺0.079*** (0.010) loss. In addition, our results are suggestive of an accumula-
Male ⫺0.182** (0.069) ⫺0.055 (0.062)
White 0.104 (0.078) ⫺0.212** (0.072)
tion effect of protracted unemployment. This was again in-
Married ⫺0.160** (0.066) ⫺0.161** (0.061) dicated for both health dimensions.
Blue-collar 0.083 (0.075) 0.001 (0.069) The study has limitations that merit recognition. Al-
Labor income ⫺0.022 (0.011) ⫺0.010 (0.001) though health status measures were ascertained prior to job
Nonhousing net worth ⫺0.007 (0.008) ⫺0.010 (0.008) loss, it is possible that respondents’ health status may have
Hypertension 0.111 (0.059) — — changed after the 1992 interview and prior to job loss. How-
Cancer 0.054 (0.129) — —
ever, it is unlikely that such changes in health would be sys-

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Heart disease 0.258** (0.095) — —
Heavy smoker 0.153* (0.081) — — tematically related to plant closings in which all workers
Heavy drinker 0.248 (0.132) — — lose their jobs. Similarly, unmeasured factors potentially as-
Obese 0.419*** (0.072) — — sociated with health, such as intervening life events, may
Baseline physical functioning 0.486*** (0.013) — — have been omitted from the model. Such omitted variables
Baseline mental health — — 0.519*** (0.024) would not bias our results unless they were also correlated
R2 0.380 — 0.197 —
with involuntary job loss. We believe that this is unlikely,
Notes: b ⫽ unstandardized regression coefficient. The estimated coeffi- given the substantial range of covariates in the HRS and in-
cients on labor income and nonhousing net worth were rescaled for consis- cluded in our models.
tency with dependent variable scale. Another limitation relates to the classification of retire-
*p ⬍ .05. **p ⬍ .01. ***p ⬍ .001. ment. Some respondents may have chosen to report that
they had retired when, in fact, they had been laid off. Such
nerable to the negative mental health consequences of job respondents would have been excluded from our analysis.
loss. The finding regarding marital status is consistent with The HRS explicitly asked retirees whether they would have
other unemployment studies that have shown that social been laid off and whether they were encouraged to leave
support can buffer the health effects of job loss (Kasl & their jobs. We found only four of the respondents reported
Jones, in press). Neither interaction effect was detected to this occurrence, but there may be others who did not report

Table 4. Least Squares Regressions of Wave 2 Health: The Effects of Unemployment Duration and Reemployment ( N ⫽ 209)a
Effect of Unemployment Duration Effect of Reemployment

Physical Functioning Mental Health Physical Functioning Mental Health

b (SE) b (SE) b (SE) b (SE)

Intercept ⫺5.858 (3.115) ⫺0.465 (2.820) ⫺3.811 (3.090) 1.190 (2.852)
Unemployment duration 0.038 (0.023) 0.033 (0.021) — — — —
Reemployed — — — — ⫺0.986*** (0.301) ⫺0.684* (0.294)
Age 0.119* (0.053) 0.045 (0.048) 0.101* (0.051) 0.029 (0.047)
Education 0.005 (0.066) ⫺0.070 (0.062) ⫺0.001 (0.063) ⫺0.075 (0.060)
Male 0.416 (0.381) ⫺0.433 (0.348) 0.359 (0.371) ⫺0.460 (0.344)
White 0.084 (0.401) ⫺0.061 (0.373) ⫺0.003 (0.391) ⫺0.112 (0.369)
Married ⫺0.382 (0.335) ⫺0.779** (0.306) ⫺0.414 (0.324) ⫺0.798** (0.302)
Blue-collar ⫺0.100 (0.364) 0.408 (0.344) ⫺0.197 (0.355) 0.365 (0.339)
Labor income ⫺0.244** (0.089) 0.149 (0.082) ⫺0.221** (0.001) 0.166* (0.081)
Nonhousing net worth 0.085 (0.151) ⫺0.018 (0.143) 0.016 (0.001) ⫺0.066 (0.143)
Hypertension ⫺0.126 (0.332) — — ⫺0.245 (0.322) — —
Cancer 0.230 (0.878) — — 0.213 (0.856) — —
Heart disease 1.026* (0.503) — — 0.949* (0.489) — —
Heavy smoker 0.671 (0.393) — — 0.772* (0.376) — —
Heavy drinker 0.768 (0.693) — — 0.772 (0.675) — —
Obese 0.934** (0.369) — — 1.033** (0.358) — —
Baseline physical functioning 0.455*** (0.064) — — 0.467*** (0.061) — —
Baseline mental health — — 0.420*** (0.095) — — 0.452*** (0.095)
R2 0.405 — 0.176 — 0.429 — 0.190 —

Notes: b ⫽ unstandardized regression coefficient. The estimated coefficients on labor income and nonhousing net worth were rescaled for consistency
with dependent variable scale.
aN ⫽ 207 in the unemployment duration model.

*p ⬍ .05. **p ⬍ .01. ***p ⬍ .001.

 HEALTH EFFECTS OF INVOLUNTARY JOB LOSS
this way due to the social stigma that may accompany layoff.
In addition, there remains the potential for response rate
bias, although HRS response rates are quite high for a na-
tional survey. It has been found that initial HRS nonrespon-
dents (who were later induced to respond) were more likely
to be non-White and less likely to report poor physical
health than were traditional respondents (Juster & Suzman,
1995). In this study, we have controlled for both race and
health status. However, the potential response bias implied
by Juster and Suzman (1995) remains a concern for the gen-
eralizability of the reported results.
Finally, data were available for only the 2-year follow-up
date; we could therefore assess only the short-term conse-
quences of involuntary job loss. Future studies will be able
to estimate the longer run effects of involuntary job loss on
health, as additional waves of the HRS become available.
Industry leaders, policy makers, and clinicians have rea-
son to be concerned with the health effects of job loss and
related unemployment. Others have demonstrated that un-
employment negatively affects future income and earning
potential (Jacobson et al., 1993; Kletzer, 1989; Neal, 1995;
Ong & Mar, 1992; Ruhm, 1990, 1991), expected conse-
quences of losing one’s major source of income. This study
shows that, in addition to the economic consequences of
worker displacement, there may be important health conse-
quences of job loss, especially among older workers.
Acknowledgments
This research was supported in part by National Institute of Mental
Health, Grant MH 14235.
We thank the participants in the Health Economics and Policy Work-
shop as well as the Aging Workshop at Yale University. We are particularly
grateful for suggestions by William White, Jody Sindelar, John Rizzo, Ann
Huff-Stevens, and Thomas Gill. We also thank Dennis Heffley for provid-
ing encouragement to pursue this study.
Address correspondence to Dr. William T. Gallo, Yale University School
of Medicine, Department of Epidemiology and Public Health, 60 College
Street, New Haven, CT 06520-8034. E-mail: william.gallo@yale.edu
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Received March 31, 1999
Accepted November 3, 1999
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