Why Are Recessions Good for Your Health?

The recent economic crisis has generated renewed interest in understanding the effects of economic downturns on individuals' well-being. One notable and now well-established fact is that mortality rates rise during periods of economic expansion and fall during recessions. While theories abound, the causes of this association are not yet well understood.

In The Best of Times, The Worst of Times: Understanding Pro-Cyclical Mortality (NBER Working Paper 17657), researchers Ann Huff Stevens, Douglas Miller, Marianne Page, and Mateusz Filipski explore the mechanisms by which economic conditions affect mortality.

One commonly proposed explanation for the finding of pro-cyclical mortality is that working individuals have less leisure time, which may lead them to exercise less and opt for quicker, less healthy foods. A second explanation is that work itself may generate stress or exposure to hazardous conditions. A third theory is that a stronger economy generates more traffic and pollution, resulting in more motor vehicle accidents and pollution-related health problems.

The authors first look at the cyclical sensitivity of mortality rates by age. They find that the mortality rate of young adults is the most sensitive to economic conditions. This would seem to provide support for the idea that work is bad for your health, since the labor supply of young adults is more cyclically sensitive than that of older adults.

Yet several of the paper's findings cast doubt on such a conclusion. First, for those under age 65, the cyclicality of mortality is primarily driven by the cyclicality of motor vehicle accidents. Second, and perhaps more importantly, the overall association of unemployment and mortality is mainly due to changes in the mortality of those over age 65, who are generally out of the labor force. The mortality rate of older women is particularly cyclically sensitive - as the authors note, "women age 65 plus account for 55% of the roughly 6,700 additional deaths (across all ages and genders) that are predicted to result from a 1 percentage point drop in unemployment."

The authors devote the rest of their analysis to exploring why older women face higher mortality risk when the economy strengthens. They suggest that there may be cyclical changes in the quality, quantity, or nature of health care inputs, which may have a greater effect on women over age 65 because they use health care more intensively.

Several basic facts are supportive of such a theory. Employment in the health care sector is lower during periods of expansion than during recessions. Nursing homes often report shortages of skilled workers, shortages that may be particularly severe when the economy is strong. A lack of trained personnel in nursing homes could affect older women more than older men since women are more likely to use nursing home care at the end of their lives.

To test their theory, the authors first explore patterns in deaths by location. They find that deaths in nursing homes are far more prone to cyclical fluctuations than deaths in other locations. In fact, cyclical fluctuations in nurs-ing home deaths among those over age 65 are sufficiently large to account for all cyclical mortality, according to the authors' estimates. The authors also show that mortality is more strongly pro-cyclical in states where a greater frac-tion of the elderly population lives in nursing homes.

Could falling quality of care in nursing homes when labor markets tighten explain these findings? The authors show that employment levels in skilled nursing facilities decline when the unemployment rate falls. The authors also show that the employment of nursing aides, who are used more heavily by nursing homes and other skilled nursing facilities, falls when the economy strengthens, while the employment of more highly-skilled doctors and nurses rises.

As the authors note, their analysis indicates that "pro-cyclical mortality cannot be explained without focusing on the elderly, particularly elderly persons who reside in nursing homes." Noting the important role that changes in the employment of less-skilled aides in nursing homes seem to play in explaining pro-cyclical mortality, the authors conclude "our findings provide new evidence that staffing difficulties among relatively low-skilled nursing occupations may be an important focus for efforts to improve the quality of health care."

The authors gratefully acknowledge funding from the NIA via the Center on the Economics and Demographics of Aging at UC Berkeley Pilot Project (NIA 5P30AG012839-15) and from the National Science Foundation (SES#09-000231).