Does Mental Health Affect Labor Market Outcomes? Evidence from a National Representative Survey in Japan

Author Name INUI Tomohiko (Faculty Fellow, RIETI) / KAWAKAMI Atsushi (Toyo University) / MA Xin Xin (University of Toyama) / ZHAO Meng (KONISHI) (Gakushuin University)
Creation Date/NO. August 2019 19-E-061
Research Project Research on the Improvement in Resource Allocation and Productivity among the Healthcare and Education Service Industries
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Japanese working hours are substantially longer than most advanced countries, and previous literatures has found adverse consequences of increasing working hours on several health measures, including mental health.

Our study confirms a large and heterogeneous effect of mental health on labor supply. We find that good mental health can significantly increase the probability of labor participation and the chance of becoming a permanent employee in Japan. The effect is stronger for women compared to men, and strongest among the middle age group. We also find an adverse effect from bad mental health on working hours of elderly self-employed male and female workers, and young, self-employed, female workers.

The Japanese government enacted "The Work Style Reform Bill" on June 2018 in order to reduce long working hours, and our results indicate that a potential improvement of mental health realized through these reforms could further lead to an increase in labor force participation.