Job loss and mental health during the COVID-19 lockdown: Evidence from South Africa

OBJECTIVES: Existing literature on how employment loss affects depression has struggled to address potential endogeneity bias caused by reverse causality. The COVID-19 pandemic offers a unique natural experiment because the source of unemployment is very likely to be exogenous to the individual. This study assessed the effect of job loss and job furlough on the mental health of individuals in South Africa during the COVID-19 pandemic. DATA AND METHODS: The data for the study came from the first and second waves of the national survey, the National Income Dynamics-Coronavirus Rapid Mobile Survey (NIDS-CRAM), conducted during May-June and July-August 2020, respectively. The sample for NIDS-CRAM was drawn from an earlier national survey, conducted in 2017, which had collected data on mental health. Questions on depressive symptoms during the lockdown were asked in Wave 2 of NIDS-CRAM, using a 2-question version of the Patient Health Questionnaire (PHQ-2). The PHQ-2 responses (0–6 on the discrete scale) were regrouped into four categories making the ordered logit regression model the most suited for assessing the impact of employment status on depressive symptoms. RESULTS: The study revealed that adults who retained paid employment during the COVID-19 lockdown had significantly lower depression scores than adults who lost employment. The benefits of employment also accumulated over time, underscoring the effect of unemployment duration on mental health. The analysis revealed no mental health benefits to being furloughed (on unpaid leave), but paid leave had a strong and significant positive effect on the mental health of adults. CONCLUSIONS: The economic fallout of the COVID-19 pandemic resulted in unprecedented job losses, which impaired mental wellbeing significantly. Health policy responses to the crisis therefore need to focus on both physical and mental health interventions.