Most prior research on mental disorders and labor market outcomes is based on either geographically narrow samples or on two broader-based data sources -- the ECA surveys, which were conducted in five communities during the early 1980’s, and the NCS, a national survey conducted during the early 1990’s. The ECA surveys and the NCS are large, population-based surveys that include diagnostic interviews for a range of psychiatric illnesses. Notably, the NCS was the first nationally representative survey to include a fully structured research diagnostic interview to measure psychiatric illnesses (NCS, 2009). However, there are potential disadvantages to using data from the ECA and NCS to inform current public policy. First, these surveys were conducted with English speaking respondents about 25 and 15 years ago respectively. The sample sizes for ethnic minorities and immigrants in the ECA and NCS are relatively small. Consequently, prior researchers have not been able to examine the relationship between psychiatric disorder and labor market outcomes in racial/ethnic minority populations.

Should we expect racial/ethnic differences in the effects of psychiatric disorders on labor market outcomes? One may not expect to see such differences if race and ethnicity do not play a role in shaping individuals’ labor market experiences. However, there are several reasons why there may exist racial/ethnic differences in the effects of psychiatric disorder. First, there are stark differences in the labor market experiences of some racial/ethnic minority groups compared to those of non-Latino whites (see Altonji & Blank, 1999 for a review).¹ Among African-Americans and Latinos, men and women earn lower hourly wages, work fewer weeks in a year, work fewer hours per week, and have higher unemployment rates compared to non-Latino whites (Altonji & Blank, 1999). Foreign-born women are less likely to participate in the labor force and to be employed compared to native-born women of the same racial/ethnic group. Among men, however, foreign-born Blacks have better labor market outcomes than native-born Blacks (de Walque, 2008). Moreover, although there is little research available on Asians, they appear to fare better in the labor market than other racial/ethnic minority groups, doing at least as well as non-Latino whites. For example, the December 2008 unemployment rate was 5.1 percent among Asians compared to 11.7 percent among African-Americans and 6.5 percent among Whites (no separate data for Latinos were available) (BLS, 2009).

One reason some minority groups fare worse than non-Latino whites in the labor market is that these groups have low levels of human capital relative to non-Latino whites. African-Americans and Latinos have lower levels of educational attainment than non-Latino whites. In 2003, 57 percent of Latinos aged 25 and over had completed a high school degree compared to 89 percent of non-Latino whites, 80 percent of African-Americans, and 88 percent of Asians (Stoops, 2004). Limited English proficiency also may play a role for foreign-born racial/ethnic minorities. Based on 2000 Census data compiled by the Migration Policy Institute, about 35 percent of the foreign-born population aged 5 and over speaks English “not well” or “not at all” (Grieco, 2003).

Latinos and African-Americans are more likely than non-Latino whites to work in less-skilled jobs and occupations. Latinos, particularly Mexicans and Puerto Ricans, are over-represented in non-professional and service occupations (Kochar, 2005). Asians, on the other hand, are over-represented in managerial and professional occupations. In 2007, for example, Asians represented less than 5 percent of employed individuals, but 29 percent of computer software engineers and 17 percent of physicians (BLS, 2008).² We control for all these potential confounders in the multivariate analysis.

In addition to differences in education, English language proficiency, and occupation, labor market discrimination may explain some portion of the differences in labor market outcomes between non-Latino whites and minority and immigrant groups. Heckman (1998) and others, however, argue that evidence based on data from the 1990’s does not support the idea that labor market discrimination is an important component of differences in earnings, at least between African-Americans and whites (Heckman, 1998) Instead, differences in skills between groups appears to be a critical factor in explaining differences in earnings.

Onset of a psychiatric disorder may be particularly harmful for the labor outcomes of minority and immigrant individuals who already face numerous disadvantages in the labor market. There are several mechanisms through which psychiatric disorders may affect labor market outcomes. Each of these mechanisms may be exacerbated for racial/ethnic minorities. First, the symptoms of psychiatric illness (e.g. depressed mood, low energy level, reduced concentration) can directly impair an individual’s ability to obtain and maintain employment. These symptoms may be more likely to lead to adverse consequences, such as losing a job, for racial/ethnic minority workers, who are more likely than non-Latino whites to work in low-status jobs. Second, employers may feel they cannot accommodate an employee with health problems. Again, this may be particularly true of employers of less-educated and low status racial/ethnic minority workers..

For African-Americans and Latinos, minority groups that face labor market disadvantages compared to non-Latino whites, we expect the coefficients on the interaction terms to be negative. Asians and Caribbeans do not necessarily fare worse than non-Latino whites in the labor market, but they still may face challenges that non-Latino whites do not face, such as issues related to discrimination and other cultural and language factors. Thus, the sign of the interaction effect for these groups may be either positive or negative, or zero. We estimate Equation 1 taking into account the CPES’ complex survey design (discussed in the next section). Equation 1 is estimated separately for males and females.

We emphasize that our approach highlights any racial/ethnic differences in the effects of psychiatric disorder on employment, but does not necessarily identify the mechanisms leading to such differences. We experiment with models that also include interactions between education and race/ethnicity, to capture any possible effects through education, but many other unmeasured channels remain.

The dependent variable in Equation 1 is binary. This indicates that using a nonlinear model, such as the logit or the probit, would be appropriate. However, we are primarily interested in the magnitude and statistical significance of the estimated interaction between race/ethnicity and mental disorder. As Ai & Norton (2003) point out, in a non-linear model, the sign of the coefficient on an interaction term and a standard t-test of this coefficient can provide misleading information regarding the interaction effect. To avoid this problem, we estimate linear probability models in which the interpretation of interaction effects is straightforward.³

In the full samples, 40 percent of males and 42 percent of females met diagnostic criteria for psychiatric disorder at some point during their lifetime. The 12-month rates of any disorder were 18 percent for males and 24 percent for females. Affective disorders (e.g., major depression) were the most common disorder:11 percent of males and 17 percent of females met criteria for this disorder in the past 12 months. The 12-month prevalence of anxiety disorders was 7 percent among males, and 12 percent among females. These rates were much higher among men and women with a lifetime history of psychiatric disorder.

Tables 2a and 2b show descriptive statistics by racial/ethnic group for males (Table 2a) and females (Table 2b). Among males, 85 percent of non-Latino whites are employed 80 percent of Latinos, 79 percent of African-Americans, 83 percent of Asians, and 85 percent of Caribbeans (Table 2a). Among females, 73 percent of non-Latino whites are employed, 56 percent of Latinos, 72 percent of African-Americans, 64 percent of Asians, and 81 percent of Caribbeans (Table 2b). For both males and females, unemployment rates are higher in all racial/ethnic minority groups compared to that of non-Latino whites.

Non-latino whites have the highest rate of psychiatric disorder. Among non-Latino white men, 20 percent have experienced a psychiatric disorder in the past year, compared to 15 percent of Latinos, 13 percent of African-Americans, 9 percent of Asians, and 19 percent of Caribbeans (Table 2a). A similar pattern emerges for females – non-Latino whites have appreciably higher rates of 12-month disorder compared to racial/ethnic minorities.

In Table 3, we show results from OLS regressions in which a binary indicator of employment is the dependent variable. Our primary interest is in the coefficient of recent psychiatric disorder and the coefficients on the interactions between disorder and race/ethnicity. Column 1 shows findings for all males, column 2 shows findings for males with lifetime history of disorder, and columns 3 and 4 show findings for all females and females with lifetime disorder. Among all males and males with lifetime disorder, having a recent psychiatric disorder is associated with a 9 to 10 percentage point reduction in the likelihood of being employed. There does not appear to be racial/ethnic differences in this effect for any group aside from Caribbeans. The interaction between Carribean ethnicity and mental disorder is positive, large in size, and statistically significant in both the all males and the males with lifetime disorder samples. We caution, however, that the number of Caribbean males with recent disorder is relatively small (about 45) so this finding is driven by a small number of observations.

The pattern of results for females is somewhat different from that of males. The main effect of disorder on employment is negative, small in magnitude and not statistically significant at the 0.05 level in the all females sample or the females with lifetime disorder sample. There are differences, however, between some racial/ethnic minority groups and non-Latino whites in how recent disorder affects the probability of employment. In particular, among Latino women, having a recent disorder reduces the probability of employment by 11 to 14 percentage points. Among African-American women, there is suggestive evidence of a larger effect of disorder on employment compared to non-Latino whites. The coefficient on the interaction between African-American and disorder is only marginally statistically significant in the all females sample, and not statistically significant at conventional levels in the females with lifetime disorder sample.

In sum, findings from Table 3 indicate that among males, mental disorders appreciably dampen the probability of employment among all racial/ethnic groups, with the possible exception of Caribbeans. Among females, the main effects of disorder on employment are much weaker overall, but we see large, negative effects specifically for Latinos. Other coefficients based on the full samples of men and women yield intuitive findings. The main effects of race/ethnicity on employment are negative for Latino, African-American, and Asian men, controlling for other factors. Among women, African-American and Caribbean women are more likely than non-Latino women to be employed, while Asian and Latino women are less likely than non-Latino women to be employed, controlling for other factors. Although not included in the tables, educational attainment is positively associated with employment, while chronic medical conditions detract from employment for both males and females. Among females, being married and the number of children detract appreciably from the likelihood of employment.