Career Effects of Mental Health

Abstract

One in twelve Americans is affected by a mental health disorder. This paper examines the effects of such disorders and treatment, using individual-level registry data on mental health diagnoses. We find that mental health conditions carry immense earnings penalties: Compared with the population, people with depression earn 32 percent less, people with bipolar disorder earn 36 percent less, and people with schizophrenia earn 74 percent less. Even compared with their siblings, they earn 35, 28, and 74 percent less, respectively. People with mental health disorders also face substantially higher risks of zero earnings and disability. To investigate the causal effects of treatments and changes in mental health we examine the approval of lithium as a treatment for bipolar disorder (BD) in 1976. Baseline estimates compare career outcomes for people with and without access to treatment in their early 20s, the typical age of onset for BD. We find that access to treatment eliminates one third of the earnings penalty from BD, reduces the risk of zero earnings by more than one third, and reduces the risk of disability by nearly two thirds. Notably, not only the costs of mental health disorders, but also the benefits from treatments are strongest in the bottom quantiles of earnings. These findings indicate that access to treatment has important implications for economic inequality.

Keywords: Mental Health, Bipolar Disorder, Depression, Schizophrenia, Earnings, Entrepreneurshio, Disability

JEL Classification: M13, J23, J24, O31, I12