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An economic perspective of mental health problems

There is ample empirical evidence showing that poor mental health is increasing, but the impact of this on long-run productivity and its implications for the labour market are not well researched. This column outlines two ways in which labour market research can contribute to the study of the impact on mental health of working conditions. It also identifies several channels related to working conditions that affect mental health, and argues that deteriorating mental health adversely affects corporate performance in the long run.

In Japan, the mental health of working people is said to have been deteriorating in recent years. Indeed, publicly available statistics such as the Patient Survey of the Ministry of Health, Labour and Welfare show a rising number of patients with mental illness. Plenty of research is taking place in fields including medicine and occupational health to try to understand the causes of mental health problems, and a great many steps are being taken to respond to these problems at the workplace, business, and the national levels.

The factors involved in mental health are many and varied, but for a working person, work styles in the workplace are an important factor. For example, if workers have to put in long hours, have little discretion over their work, or get few opportunities to change assignments or workplaces, this adds to their stress and increases the likelihood of deteriorating mental health.

On the other hand, there has been little research on mental health problems in the field of labour economics, which focuses on analysing work styles in the workplace. As for Japanese work styles, we see moves everywhere to try to change from so-called ‘Japanese employment’ practices. New aspects now include reducing long working hours, seeking a better work/life balance, diversity management, and encouraging women to be more involved in the workplace. These moves suggest that work styles under conventional Japanese employment practices create some kind of difficulty for workers. In other words, there are concerns that work styles under Japanese employment practices are a major factor in causing mental health to deteriorate.

Looked at in this way, it seems quite possible that if the field of labour economics (with its analysis focused on work styles) were to offer plenty of examples of research validating the factors that cause the mental health of working people to deteriorate, as well as the impact of such deterioration, it might suggest new ideas and lead to improvements in workplace mental health, in turn helping to improve corporate management.

Taking a global view, the OECD published a report titled, Sick on the Job?, in 2012. Since then, countries have started debating how to address mental health problems in businesses and workplaces. LSE Professor Richard Layard is performing some particularly in-depth research on mental health in England. In Japan, meanwhile, the revised Industrial Safety and Health Act has required businesses to provide stress checks for their employees since December 2015. There has also been more attention here on health management, which is the idea that corporate earnings improve when employees are happy and healthy. So there is increasing need for research on mental health problems from the perspective of work styles and corporate management.

Possibilities for an economics approach

So what can we expect from economics, or labour economics, on this issue? Economists, naturally, cannot take a medical perspective. An economist does not have the skills needed to intervene in and experiment on workplaces and workers (such as providing counselling or revising work styles in workplace units) or to develop scales to measure mental health. However, there has been plenty of research seeking to theoretically or empirically explain what kinds of work styles in a Japanese workplace result from different mechanisms. Other research from the field of labour economics looks at how those work styles affect business productivity and profitability.

Additionally, empirical analysis from the field has led to the development of many kinds of econometric techniques that statistically control for all types of noise and biases, and discover causal and essential relationships from observation data based on questionnaire surveys personnel and health management information.

There are at least two ways that labour economics research might help this by applying its accumulated learnings to mental health problems: by using labour supply-and-demand mechanisms and internal labour market models, and by using observed data observed data.

Conceivable approach 1

The first approach is to reveal the characteristics of work styles, based on labour supply-and-demand mechanisms and internal labour market models, and use those characteristics to explain the impact that work styles have on workers' mental health and the role of the business in mental health. To give an example, businesses with a strong tradition of Japanese employment practices make a large human resource investment (i.e. extensive training) in their employees, especially regular employees. They hire for the long term, hoping that employees will use the skills they have acquired for many years at the same company. At such businesses, there is a high risk of employees' mental health deteriorating because of the strong tendency to work long hours. At the same time, long-term employment is very rational for such business, so it is all the more important to practice good health management. Doing so will keep employees healthy and allow them to work for many years without mental health deterioration.

Conceivable approach 2

The other approach is to reveal work style factors that impact mental health from observed data (controlling for heterogeneities between individual employees and businesses, and other noise), and to show how mental health affects objective indicators such as business productivity and profitability. For example, when deteriorating mental health is observed, people often assume the cause to be personal problems (the individual's personality or upbringing). But econometrics can empirically analyse the same situation, controlling for the various factors unique to individuals, and reveal the work factors common to workplaces (work hours, workplace management, etc.) that impact mental health. Doing so would require the use of panel data from follow-up surveys of employees and businesses. If the results indicate factors that are common to workplaces, however, it would mean there are systemic problems common to workplaces that cause mental health to deteriorate, and it would show businesses the need to take action against mental health problems.

Examples of research at RIETI

I am a participant in the Labor Market Analysis Using Matched Employer-Employee Panel Data research project at RIETI, which is conducted with awareness of these problems. In this project, we perform mental health research with an economics approach. As noted above, panel data are essential to take advantage of our economic research approach. Under this project, the Survey on Human Capital Formation and Work-life Balance is given each year to businesses as well as their employees. The data harvested from this survey are constructed as panel data and used for analysis. Specifically, this is matched panel data, meaning that responses from the businesses are linked to responses from their own employees. This lets the research organically link employees, workplaces, and business management.

The findings from the project to date are as follows. First, the research shows that factors affecting employees' mental health include long work hours, job characteristics, workplace management methods, workplace climate, job transfers, and promotions, among others (Kuroda and Yamamoto 2016a, Sato 2016). Second, mechanisms that cause employee mental health to deteriorate include working irrationally long work hours because of such psychological tendencies as overconfidence bias (i.e. the employee has too much confidence in his or her own health), which could result in unexpected health damage (Kuroda and Yamamoto 2016b). Research also has looked at the impact of deteriorating mental health on corporate performance, with the results showing that businesses with higher sick leave or turnover rates of employees with mental disorders tend to have poorer performance as measured by return on sales (Kuroda and Yamamoto 2016c).

There are still just a few examples of research that validate mental health problems from an economic perspective, and more research needs to be done. Moreover, mental health is a major issue that is relevant to a number of fields, including medicine, epidemiology, industrial health, and psychology. As such, it is important to address it with interdisciplinary research, and researchers in various fields should collaborate in this regard.

Editor’s note: This column was reproduced with permission from the Research Institute of Economy, Trade and Industry (RIETI).


Kuroda, S, and I Yamamoto (2016a), “Workers' Mental Health, Long Work Hours, and Workplace Management: Evidence from workers' longitudinal data in Japan”, RIETI Discussion Paper 16-E-017.

Kuroda, S, and I Yamamoto (2016b), “Why Do People Overwork at the Risk of Impairing Mental Health?”, RIETI Discussion Paper 16-E-037.

Kuroda, S, and I Yamamoto (2016c), “Does Mental Health Matter for Firm Performance? Evidence from longitudinal Japanese firm data”, RIETI Discussion Paper 16-E-016.

Sato, K (2016), “How Does Promotion to a Managerial Position Affect Mental Health?” RIETI Discussion Paper 15-J-062.

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