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«WORKING PAPER N° 2014 - 8 Health, Work and Working Conditions: A Review of the European Economic Literature THOMAS BARNAY TEPP - ...»

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N° 2014 - 8

Health, Work and Working Conditions:

A Review of the European Economic Literature



TEPP - Institute for Labor Studies and Public Policies

TEPP - Travail, Emploi et Politiques Publiques - FR CNRS 3435

ISSN 2110-5472

Health, Work and Working Conditions:

A Review of the European Economic Literature Thomas Barnay (Upec, Erudite, Tepp)



Economists have traditionally been very cautious when studying the interaction between

employment and health because of the two-way causal relationship between these two variables:

health status influences the probability of being employed and, at the same time, working affects the health status. Because these two variables are determined simultaneously, researchers control endogeneity skews (e.g., reverse causality, omitted variables) when conducting empirical analysis.

With these caveats in mind, the literature finds that a favourable work environment and high job security lead to better health conditions. Being employed with appropriate working conditions plays a protective role on physical health and psychiatric disorders. By contrast, non-employment and retirement are generally worse for mental health than employment, and overemployment has a negative effect on health. These findings stress the importance of employment and of adequate working conditions for the health of workers. In this context, it is a concern that a significant proportion of European workers (29%) would like to work fewer hours because unwanted long hours are likely to signal a poor level of job satisfaction and inadequate working conditions, with detrimental effects on health. Thus, in Europe, labour-market policy has increasingly paid attention to job sustainability and job satisfaction. The literature clearly invites employers to take better account of the worker preferences when setting the number of hours worked. Overall, a specific “flexicurity” (combination of high employment protection, job satisfaction and active labour-market policies) is likely to have a positive effect on health.

JEL Codes: I18, I28, J28, J81 Key words: work, health, working conditions, employment, causality Health, work and working conditions in Europe: an economic literature review, T.Barnay (Upec, Erudite ; Tepp) Page 1 Health, Work and Working Conditions: A Review of the European Economic Literature1 Thomas Barnay (Upec, Erudite; Tepp)2

1. Introduction The interactions between health, work and working conditions have attracted considerable interest recently in Europe. A large part of European employees (EU27) - about 80% - benefit from ‘permanent contracts’ which are stable and offer guarantees in terms of job security (EWCS 2010)3. Nevertheless, even these workers are being put under rising pressures by deep changes in labour-market trends. Job strain may have a large impact on health, and in return a deteriorated health status undermines employability. European workers experience a degradation of the quality of working life between 1995 and 2005 (Greenan et al., 2013). Almost one third of EU citizens report that work affects their health (EWCS 2010). When asked how work influences their health, 25% of Europeans declared work to be pathogenic. Conversely, only 7% reported work to be positive to their health. The average weekly working time has decreased from 40.5 hours in 1991 to 37.5 hours in 2010 due to the rising share of part-time jobs (38% for women and 13% for men) and the declining share of people working very long hours (48 hours or more per week). Yet, more European workers say they would like to work fewer hours (31%) than workers who say they would like to work more hours (16%), suggesting a high level of dissatisfaction with working conditions (Eurofound, 2012). Moreover, European workers tend to be concerned about their exposure to risks of work-related injuries resulting from painful positions (reported by 46% of the European working population) as well as repetitive movements (63%). The growing use of information and communication technologies and This working paper is a joint publication with Oecd WP (Barnay, T. (2014), “Health, Work and Working Conditions: A Review of the European Economic Literature”, OECD Economics Department Working Papers, No.

1148, OECD. Publishing. http://dx.doi.org/10.1787/5jz0zb71xhmr-en). I would like to thank Carissa Faulkner (Oecd), Nathalie Greenan (Cee), Christine Le Clainche (Cee, Ens Cachan, Lameta), Patrick Lenain (Oecd), PierreJean Messe (Cee), Catherine Pollak (Drees) and Yann Videau (Upec, Erudite, Tepp) for their comments on a preliminary version and Eric Defebvre (Upec, Erudite, Tepp) for his help on Health at Work European policies.

2 PhD, Assistant Professor in Economics. Erudite (Research team on the use of individual temporal data in economics); Tepp (Cnrs 3435); Faculty of Economic Science and Management of the University Paris-Est Créteil;

Mail des mèches – Route de Choisy; 61, avenue du Général de Gaulle 94000, Créteil. France. barnay@u-pec.fr 3 The European Working Conditions Survey (EWCS) is an important source of information about working conditions, work quality and employment. The fifth ECWS concerns EU27, Norway, Croatia, the former Yugoslav Republic of Macedonia, Turkey, Albania, Montenegro and Kosovo.

–  –  –

The interaction between health and employment is the subject of numerous research studies and can be understood as a two-way causal relationship: employment has an impact on health and health has an impact on employment (“healthy worker effect”) (Currie and Madrian, 1999;

Lindeboom, 2006). Indeed, in a labour-market model, health status may be endogenous both in a structural sense (e.g., health and labour market outcomes are determined simultaneously) and in a statistical sense (e.g., unobserved heterogeneity). This study reviews, in European countries, empirical papers dealing with this two-way causal relationship.

The economic literature on the relationships between employment and health is sparse, compared to the vast number of studies published in other fields such as epidemiology, sociology and psychology. Economists have long been very cautious on this issue because causal mechanisms are difficult to identify and subjective variables are difficult to study5.

More research on these issues would be important because inadequate working conditions and poor job satisfaction negatively affect health, with costly consequences both for individuals and for society at large. At a broad level, the social costs of mental health have been estimated to be as high as 3 % to 4 % of GDP in the European Union (International Labour Organization).

Sobocki et al. (2006) estimate that the total cost of psychological depression in Europe was €118 billion in 2004 (e.g. about €253 per capita). In some high-income countries, 40% of disability can be linked to mental disorders (WHO, 2010).

Furthermore, faced with unsustainable pension systems, European governments have raised retirement ages and/or increased the contribution period required to access full pension rights.

However, despite the objective set at the Stockholm European Council to achieve an employment rate of 50% for those aged 55-64 years old by 2010, the European average was still only 47.4% in 2011. Hard working conditions and health capital degradation contribute to lower productivity among older workers, increasing their take-up of sick leave and raising the risk of job loss (Blanchet and Debrand, 2005).

4 In France, new work practices (e.g. quality norms, job rotation, flexibility of work schedules) are correlated with bad mental health and a detrimental work environment (Askénazy and Caroli, 2010).

As pointed out by Freeman (1978), “subjective variables like job satisfaction (…) contain useful information for predicting and understanding behavior” but “they also lead to complexities due to their dependency on psychological states” (about this second point, see section 2).

–  –  –

The paper is organized as follows. Section 2 deals with methodological issues around employment and health measurements. Section 3 describes the main results relative to the effect of employment on health. Section 4 presents the European literature relative to the healthy worker effect. In a final section, we discuss policy issues related to health at work.

2. The measurement frame of health, work and employment relations Various sources of bias may affect the assessment of health, work and employment relations, such as reporting biases related to the collection mode of information, skews in health and work measurements and justification biases.

–  –  –

Reporting biases Biases are inherent in all surveys of self-reported subjective variables. Self-assessments, which are included in most health national surveys, are affected by social characteristics and individual health status, which can result in sociocultural and endogenous biases (Bound, 1991). Moreover, the comparability of results aggregated by categories such as social group, gender and age can be compromised by the existence of different norms and expectations, thus resulting in measurement errors (Akashi-Ronquest et al., 2011; Etilé and Milcent, 2006; Shmueli, 2003). Using the SHARE6 survey, Jürges (2007) explores Self-Assessed Health (SAH)7 across European countries. They run an Oaxaca-Blinder decomposition of SAH to distinguish “true” health (captured by chronic diseases and objective health data such as grip strength, walking speed and Body Mass Index) and cross-cultural differences in reporting styles. They show that most of the differences between European citizens in better health (Denmark, Sweden) and those in worse health (Spain, Italy) is attributed to differences in reporting styles. To avoid these self-related biases, authors combine subjective measures of health status with objective measures, in 6 Share: Survey of Health, Ageing and Retirement in Europe. This longitudinal survey contains accurate data on health, employment and working conditions of a representative sample of individuals aged 50 and over in 11 European countries. This survey is equivalent of The Health and Retirement Study (HRS) in the USA.

SAH is measured on a five point scale asking the question “How is your health in general; would you say it is…”. SHARE contains two different 5-point scales for SAH, one ranging from ‘excellent’ to ‘poor’, the other from ‘very good’ to ‘very poor’.

Health, work and working conditions in Europe: an economic literature review, T.Barnay (Upec, Erudite ; Tepp) Page 4 particular indicators that pertain to the relation between health and employment. Based on SHARE data, Kalwij and Vermeulen (2008) confirm that the introduction of objective measures is required to control SAH endogeneity when assessing the impact of health on employment8.

The most natural objective indicator is disability (see subsection 4.1), often assessed in surveys in terms of activity limitations9. Nevertheless, disability is only one aspect of health status and other health indicators must be used to take into account the multidimensional nature of health (Loprest et al., 1995).

Justification bias Many articles in the literature deal with the potential existence of a “justification assumption” according to which self-reported health (or disability) would depend on people’s labour-market situation. More precisely, people would tend to justify their labour force non-participation by over reporting a handicap (most frequently defined as a long-term health event that limits the type and quantity of work that people can perform). A series of studies tackles the issue of endogeneity between self-reported disability measures and labour force participation (Dwyer and Mitchell, 1999; Lindeboom and Kerkhofs, 2009; Benitez-Silva et al., 2004; Cai, 2009; Gannon, 2009; Akashi-Ronquest et al., 2011). Although some studies, such as that of Lindeboom and Kerkhofs (2009) and Gannon (2009) show, respectively on Dutch and Irish panel data, that the economic incentives related to labour-market status encourage people to misreport their disability status (even when controlling for unobserved heterogeneity as in Gannon, 2009), other studies conclude the opposite result10.

2.2 The Measurement of Work and Employment Relations

Work is easier to measure than health. In microeconomic studies of labour supply, we traditionally distinguish two definitions of work: an intensive margin (working hours) and an extensive margin (employment status). In an intensive margin approach, a great deal of definitions has been studied in the epidemiological literature.

The measurement of work relations

Moreover, SAH stay a good proxy of health status because it is highly correlated with objective measures such as mortality (Idler and Benyamini, 1997) 9 A very widespread question to measure activity limitation is “For the past six months at least, to what extent have you been limited because of a health problem in activities people usually do?” This question corresponds to the Global Activity Limitation Indicator (GALI) which is standardized, at European level, through The Minimum European Health Module.

10 This is notably the case of Cai (2009) on Australian data.

Health, work and working conditions in Europe: an economic literature review, T.Barnay (Upec, Erudite ; Tepp) Page 5 Working conditions have been defined in seminal sociological and psychological papers. In particular, the Job Demand-Control (JD-C) Model, e.g. the imbalance model between perceived pressure (demand) and decision latitude (level of control), refers to concepts of job decision latitude, job demand and job strains (Karasek, 1979; Karasek and Theorell, 1991). In its basic form, the JD-C

Model postulates that the primary sources of job stress lie within both job’s basic characteristics:

psychological job demands (high pressure of time, high working pace, difficult and mentallydemanding work) and job decision latitude (worker's ability to control his own activities and skill usage) or job control. Strong job demand combined with low job control leads to a high-strain jobs.

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