Mental health and productivity: evidence for the UK

Understanding the drivers of productivity is fundamental to securing future wellbeing, but there are still large gaps in our knowledge concerning the relationship between productivity and the health of the labour force. We explore whether changes in mental health contribute to changes in labour market productivity. We exploit the COVID-19 modules of the UK Household Longitudinal Study, which include a direct (self-reported) measure of productivity change relative to pre-COVID levels, as well as a clinically validated measure of mental health. To overcome endogeneity problems we use an instrumental variable approach implemented in an ordered probit model using two-stage residual inclusion. Our results show a strong positive relationship between mental health and productivity. At an individual level a unit decrease in mental health leads to an expected loss in productivity of approximately 4 minutes per working day. In our sample the average decrease in mental health over the period we study is -1.675, which predicts a reduction in productivity of 2,531 minutes for each hour that the sample works. Scaled up to the entire population of workers in June 2020, then total productivity losses would have been substantial.