Mental Health and Productivity
Stanford University - Behavioral Economics Final Project | Group 15
Motivation and Study Outline
Along with having a significant impact on a person’s quality of life, depression, excessive anxiety, and other mental health disorders could have similar effects on workers in their respective workplaces. Using firm-level surveys on employee mental health and productivity at management consulting firms, our paper estimates the impact of mental health on worker productivity. We utilize established clinical methods to measure mental health and use time-logs and manager satisfaction as productivity measures. We combine the survey data with an instrumental variable approach, using family bereavement, to estimate causal effects.
An increasing awareness of mental health as of recent has led to studies analyzing the effects of mental health disorders in patient populations and nationwide surveys to measure quality of life. However, the same curiosity has not reached workplaces and the employees that occupy them. Given the past literature on the effects of mental health on the unprofessional life, questions about its impact on productivity and worker output arise. Namely, how do changes in anxious or depressive symptoms impact firm output?
Studies have shown that poor health, whether mental or physical, leads individuals to take more time off work, a phenomenon known as absenteeism, but also to be less productive on the job, known as presenteeism. These findings suggest that mental health impacts worker output through both of these channels and the main goal of our paper is to quantify the extent of this impact.
We expect β1 from both the simple OLS and IV regressions to be positive, in line with the results of previous studies in the literature. We hypothesize that these results arise through two main mechanisms: (i) mental health distorts the worker’s costs of/utility from work and leisure and by consequence, impacts the worker’s allocation of time at work, and (ii) when at work, mental health and well-being impact the amount of mental resources available to do one’s job, affecting quality.
We further disaggregate our expected findings by our three different measures of productivity:
Hours Worked
Poor mental health increases the cost of going to work relative to staying home and given a worker’s time constraint, this could decrease the total number of hours worked via substitution effects.
On the contrary, we may see an increase in hours worked if employees are using their jobs as a coping strategy for poor mental health, for example one may spend more time being productive if they do not want to think about negative events, like the death of a loved one. This can be said to increase the cost of leisure and cause substitution towards work.
Monetary Value
Poor mental health reduces the amount of mental resources and energy left to do work because a larger portion of an individual’s mental endowment is spent worrying or thinking about non-work related matters. Employees may also spend a greater proportion of their time on tasks that earn less money for the firm but are easier to do, causing a decline in their computed monetary value of work. Conversely, better mental health could increase the completion of high-value tasks, through the same mechanism.
Manager Satisfaction
Work Quality: Mental health may affect the costs of more difficult tasks. Even if employees are working the same amount of hours, and have the same relative proportions of tasks, those with poor mental health may be able to accomplish less in an hour, as each unit of output costs them more to produce. These employees may also make more mistakes, and be less willing or have less time to self-teach, which would decrease their work quality score.
Client Engagement/Firm Initiatives: Those with poor mental health may be less able to make connections with co-workers, less willing to take on new projects, less engaged with clients, and less proactive overall, leading to lower scores on both client engagement and firm initiatives.
Actual vs. Expected Output: If mental health also distorts time preferences, individuals with poor mental health may procrastinate more or even not be able meet expectations as well as individuals without mental health problems.