The increasing prevalence of mental health problems and limited capacity of healthcare providers have resulted in long waiting times for mental health treatment in many countries. Using administrative data on mental health treatment and labor market status for all inhabitants of the Netherlands, I find that these waiting times for mental health treatment have substantial repercussions on labor market outcomes for at least five years after the start of treatment. A two-month (one standard deviation) increase in waiting time results in a four percentage point decrease in employment probability and a two percentage point increase in the probability of disability benefit receipt. I instrument individual waiting times using regional waiting times to account for endogeneity. Furthermore, I show that vulnerable groups with low education levels or migration backgrounds are especially affected given both that the impact of waiting time is larger for them and that their average waiting time is significantly longer.
While a large share of Disability Insurance recipients in OECD countries are expected to recover, outflow rates from temporary disability schemes are typically negligible. We estimate the disincentive effects of disability benefits on the response to a (mental) health improvement using administrative data on all Dutch disability benefit applicants. We compare those below the DI eligibility threshold with those above and find that disincentives significantly reduce work resumption after health improves. Approximately half of the response to recovery is offset by benefits. Estimates from a structural labor supply model suggest that disincentives are substantially larger when the worker's earnings capacity is fully restored.tem
Workers with fixed-term contracts typically have worse health than workers with permanent contracts. We show that these differences in health translate into a substantially higher (30%) risk of applying for DI for the Netherlands. Using unique administrative data on health and labor market outcomes of all employees in the Netherlands, we decompose this differential into: (i) selection of workers types into fixed-term contracts; (ii) the causal impact of temporary work conditions on worker health; (iii) the impact of differential employer incentives to reintegrate ill workers; and (iv) the differential impact of labor market prospects on the decision to apply for DI benefits. We find that selection actually masks part of the DI risk premium, whereas the causal impact of temporary work conditions on worker health is limited. At the same time, the differences in employer commitment during illness and differences in labor market prospects between fixed-term and permanent workers jointly explain almost 90% of the higher DI risk.