THE IMPACT OF LABOR-FORCE HISTORY ON SELF-ESTEEM AND ITS COMPONENT PARTS, ANXIETY, ALIENATION AND DEPRESSION

Psychologists Erikson (1959), Jahoda (1979, 1981, 1982) and Warr (1987 ) have offered theories to explain how experiences such as joblessness may lead to a decline in mental health. Other psychologists, includin g Rotter (1966) and Rosenberg (1965), have designed and validated surv ey instruments capable of measuring various aspects of emotional healt h including self-esteem. Using such construct measures the correlation between unemployment and self-esteem has been estimated. Unfortunatel y, the accuracy of these estimates is marred by three statistical prob lems: omitted variables, unobserved heterogeneity, and data selection. Therefore, the failure of a consensus to emerge regarding the impact of unemployment on self-esteem is not surprising. This paper offers ne w estimates of the relation between unemployment and self-esteem using a methodology that controls for the three potential sources of bias i dentified. The data are drawn from the U.S. National Longitudinal Surv ey of Youth which provides detailed information on the personal charac teristics of individuals in the sample, including their self-esteem, a s well as their labor force experiences. We find clear evidence that h aving recently completed a spell of joblessness, due either to unemplo yment or time spent out of the labor force, damages an individual's pe rception of self-worth. Exposure to bouts of both forms of joblessness also significantly harms self-esteem, and the effect of such exposure persists. Our decompositional analysis suggests that joblessness dama ges self-esteem by generating feelings of depression. Clearly, policie s designed to lessen joblessness will also yield a psychologically hea lthier labor force.