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Towards a social psychology of the labour market: or why we need to understand the labour market before we can understand unemployment.

In this paper it is argued that the attention given by psychologists to individuals who happen, at a particular point in time, to be unemployed, has detracted from an understanding of the more widespread and complex ways in which conditions in the labour market affect the psychological health of the population. In focusing on unemployment rather than on other correlates of economic recession the literature has largely ignored the economic and sociological literature on the labour market. Not only has this blinkered researchers to the real nature of the experience of unemployment and the amount of psychological distress that accompanies a reduction in the demand for labour, but it would also have serious repercussions if the psychological literature were to influence government policy towards labour market regulation. It is proposed that the most fruitful way forward for psychological research to go will be to enlarge its sphere of interest, perhaps by adapting the explanatory frameworks developed in the studies of unemployment and psychological well-being to other labour market phenomena such as job insecurity, promotions and demotions, stagnated careers or thwarted expectations.

Even in severe economic recessions, the increase in the number of individuals registered as unemployed is relatively small in comparison to the number in the workforce as a whole. For instance, in Britain the official unemployment rate went from about 6 per cent in the late 70s to about 12 per cent in the early 80s.(1) Whilst we know very well from the accumulated evidence that a large number of those extra claimants were experiencing very unpleasant psychological states, nevertheless it is surprising that the 88 per cent of the workforce who were working at that particular point in time have been largely ignored. The recession would have caused stressful life-events, threatening environments or a reduction in the quality of life for many of them (it is impossible to put any meaningful estimates on the numbers involved) which may, in total, have caused a greater reduction in the mental health of the nation than that arising from the more acute suffering of the smaller number who were unemployed. Whilst the unequal sharing of the suffering may, in itself, be of political importance, in terms of the psychological burden on the nation, the effects of recession to those in jobs has been largely ignored. This paper starts with some suggestions as to why the psychological literature has been so narrowly focused on unemployment, whilst ignoring other labour market phenomena. Second, several examples will be given of ways in which the literature's obliviousness to labour market processes has led to flaws both: (a) in our understanding of the plight of the unemployed; and (b) the research designs used to investigate unemployment. Third, useful theoretical frameworks for studying the labour market are proposed, and, fourth, a few examples of the sorts of labour market phenomena which might be studied for their psychological impact are discussed. Finally the potentially adverse policy impact of the narrow focus on unemployment is discussed.

Why the preoccupation with unemployment?

There are a number of reasons, to do with the history of our discipline and with the nature of the labour market, which may have contributed to the narrow focusing of the psychological literature on unemployment rather than more general phenomena that occur when there is a fall in the demand for labour.

First and foremost, unemployment is much more readily visible, and easily defined, than other forms of disadvantage in the labour market. Governments readily (but not unproblematically) delimit who is employed or unemployed for us, and even if we reject that definition as being over- or underinclusive, alternative definitions are readily available. This makes for relatively easy categorization into 'treatment' and 'control' groups of the 'classic' quasi-experimental or non-experimental design (the control group being either the reemployed or predismissal individuals in the case of longitudinal designs, or judiciously chosen employees in cross-sectional designs). By contrast, trying to operationalize other types of labour market experiences would be far more complex (imagine, for instance, the problems that would arise in attempting to define a demarcation between individuals with successful careers and those with careers that started well but then stagnated). At least with studies of unemployment, some comparisons are possible between different studies (albeit taking account of the differing demographic characteristics and unemployment environments in disparate studies) which has led to a moderate level of cohesiveness in the field. Whilst it is unlikely that the same theoretical headway would have been made in the relatively early days had the focus of study been less tightly defined, this restriction has now outserved its purpose.

A second, related reason for the narrow focus on unemployment might again be found from within the roots of the discipline. Jahoda (1988, 1989) criticizes the nature of psychological theories as being concerned with the cognitive processes of the individual rather than the nature of the social environment which shapes our behaviour or well-being. Similarly, a training in psychology consists of giving students an understanding of those cognitive or intra-psychic processes, and how to further explore them, but not an understanding of how to explore social environments. In addition to this limited focus on the human mind, however, applied social research should also require an understanding of the nature of the particular environments in which people are being studied; for instance, applied developmental psychologists often require a knowledge of the family or school environment. However, the studies of unemployment have not shown the same detailed understanding of the nature of the labour market.

There are several reasons why this might be the case. In the first instance, the labour market is one of the most complex socially constructed phenomena that psychologists have to deal with. It is influenced by numerous institutions (e.g. employers, government legislation, trade unions, pressure groups, the education system, the family system, etc). If that were not enough, it has been further shrouded in mystery by the economic analyses and jargon that are used to describe it. Conceptually, there is a lot more work to be done before economic theories and models (which generally seek an understanding at a highly aggregated level) can be used to understand the experiences of the individual. However, until that sort of understanding is displayed in the psychological literature, there will be severe limits on the extent to which we can locate the link between employment and mental health in a wider perspective than the simple dichotomy of employment and unemployment.

A final reason for the neglect of the effect of labour market phenomena (other than unemployment) on mental health is that it has fallen uncomfortably between the two principal levels of analysis that have been used in studying the economic determinants of psychological health. Whilst surveys of individual symptoms of poor mental health have generally compared those with and without jobs, the aggregate studies correlating mental health (normally psychiatric admissions, stress-related mortality or suicide rates) with economic indicators have had the potential to look at the wider effects of economic cycles. And whilst these studies might allow one to calculate the social cost of economic recession (e.g. Brenner, 1973, 1979) they give little indication of the exact causal paths in the link between the economy and the individual, and are thus of little value in formulating theories which attempt to understand processes at the psychological level. There are almost no studies that attempt to relate psychological symptoms manifested by employees to the rate of unemployment in their local labour markets (Catalano & Dooley, 1983 and Dooley, Catalano & Rook, 1988 are notable exceptions to this).

Ignorance of labour market phenomena and psychological research

In this section several examples are given where psychological research has been based on a rather simplistic conception of the nature of labour markets, leading to results that are, at best, peripheral to gaining an understanding of unemployment which may lead to an alleviation of its damaging psychological effects. It is not the intention here to pick out specific examples of 'bad' studies, but rather to highlight general assumptions that underlie much of the literature in the field but which bear little relationship to the reality of the labour market.

Take, for instance, the way in which redundancy and unemployment are taken to be practically synonymous in the unemployment literature. Yet a recent survey of unemployment flows in Britain found that only 37 per cent of the unemployed sample reported being made redundant from their last job--exactly the same proportion as those claiming to have left their last job of their own accord (Daniel, 1990)! It is not as if redundancy is a rare event--recent studies of British labour markets (Burchell, 1990) have shown that involuntary job quits are both fairly common (accounting for approximately 22 per cent of all men's transitions between organizations, and 13 per cent of women's transitions). Neither would they seem to be particularly traumatic in most cases; in 58 per cent of those cases for men, and 52 per cent of cases for women, the next job after the involuntary quit was better paid (measured by self-report) than the one that they had left. It seems to be the case that, for many employees, involuntary quits are the normal way that they leave jobs, particularly in seasonal employment and in the construction industry, and in the majority of cases employees seem to be able to cope with that without economic (and presumably with little psychological) cost.

A study of unemployment flows shows that, rather than unemployment being started by a dismissal and lasting until reemployment, a more typical scenario may be of the worker who repeatedly takes unsatisfactory jobs, and leaves them again as the financial and/or psychological benefits of working are not appreciably better than being unemployed. This is illustrated well by Daniel's (1990) data on flows again. For instance, of the 48 per cent of the men and women who found initial jobs within five weeks of becoming unemployed, they went on to spend an average of nearly six of the next 20 months following unemployment out of work.

Not only has this sort of career been largely ignored in the psychological literature, where the much smaller number of individuals with longer continuous spells of unemployment have more typically been targeted, but the way in which unemployment is described in the literature overlooks these types of unemployed careers.

Take, for example, the literature on stage theories of unemployment (see Fryer, 1985, for a critique and Feather, 1990, for a recent review). Almost all of the theories that have been proposed report that individual workers go through a set of stages such as periods of shock, optimism and pessimism. Whilst this may be true of individuals who had not previously experienced unemployment, it seems a case of gross overgeneralization.

The nature of the initial jobs which the unemployed take to re-enter employment has also been somewhat ignored. A very high proportion of those jobs are temporary, seasonal, casual or fixed term (Burchell, 1992; Daniel, 1990), and there is evidence (for men at least) that there is little or no psychological benefit from reemployment in insecure jobs (Burchell, 1992). Yet studies of those individuals with complex patterns of repeated unemployment highlight the psychological and financial problems of the transitions into employment as well as the transitions back into unemployment (e.g. McLaughlin, Millar & Cooke, 1989). In a psychological literature that focused on unemployment as it is actually experienced, such studies would be central rather than peripheral and rare.

Daniel also criticized psychology researchers directly as being a group whose ignorance of the very high flow backs into employment, particularly in the early stages of unemployment, makes them incapable of designing a feasible research programme:

The present author is still asked to referee research applications, most commonly from psychologists, it seems, who propose to monitor the experience of unemployment among 100 people over the year after they lose their jobs. It is hardly surprising that so much policy towards the unemployed is unsatisfactory if such basic misconceptions remain so widespread (Daniel, 1990, pp. 7-8)

An interdisciplinary theoretical perspective

It would be too great a task to develop a new perspective for psychologists in understanding the labour market in this paper, so discussion will be limited to giving a few thoughts as to where a fruitful search for enlightenment might start. Mainstream economic theories are unhelpful for a number of reasons. In the first instance, most economic theories of the labour market are more interested in explanation at the macro level, whereas a psychological interest will be more interested in phenomena at the individual and small-group level. And whereas economists are more interested in the effects of the human psyche on economic behaviour, the study of psychological well-being is more concerned with the opposite relationship, the effect of the economy on the individual.

However, one theoretical perspective that might provide a bridge between psychological and socio-economic studies of the labour market is labour market segmentation theory (see, for an overview, Baron & Norris, 1976; Burchell & Rubery, 1990 or Osterman, 1988). Rather than starting from the mainstream economic premises that all 'agents' in the labour market are essentially profit- or wage-maximizing decision makers, differing primarily in the education (or 'human capital') and intrinsic ability they bring to the labour market, segmentation theory attempts to understand the labour market as a social phenomenon. Within that paradigm the expectations and power that different individuals and groups bring to the labour market are seen as being of central importance. Some groups (a 'primary segment') obtain and retain powerful positions in the labour market because of their individual and collective (through trade unions, professional associations, etc.) behaviour. They are typically employed by firms in stable or expanding product markets, using economies of scale and modern mass-production techniques. Such firms actively seek to reduce labour turnover by creating 'healthy' employment environments conducive to high levels of motivation and low levels of turnover. However, other groups of employees, because of the weaker bargaining positions that they come to the labour market with, tend to be employed by less profitable firms where lower wages, poorer conditions and worse job security and promotion prospects are the norm (women and ethnic minorities are sometimes held to be synonymous with the term 'secondary segments'). The forces that maintain these two groups as separate and essentially non-competing factions in the labour market are complex and varied, but the different expectations and psychological experiences of those individuals are seen as potential factors. Early theorists in this tradition (e.g. Doering & Piore, 1971) suggested that, after a period of time working in the conditions of the secondary labour market, workers would internalize a more casualized attitude to work, thus perpetuating their exclusion from the primary sector. Whilst later theorists have tended to downplay these 'feckless worker' explanations, and emphasized instead the role of the demand side in structuring the labour market into segments where very different processes and rewards operated, nevertheless it is still accepted that labour markets must be treated as multifarious phenomena where the psychological state of the workforce is potentially capable of structuring the system. Thus, within this framework, psychologists could not only investigate the effects of the labour market on the individual, but also the part played by those effects on the operation of the labour market.

Such a theoretical framework could also add to a more theoretically informed treatment of the different ways in which unemployment affects different groups. By starting with the assumption that labour markets are socially constructed, it follows that they will be constructed differently by different groups. For instance, it has been assumed (Baron & Norris, 1976) and demonstrated empirically (Burchell, Elliott & Rubery, 1993) that gender is one of the main structuring supply-side variables. Furthermore, women's work is itself very heterogeneous, with the women's differing domestic circumstances being a central determinant of their diverse positions in the labour market. When considered against such a backdrop, the search for simple gender or ethnic origin differences in psychological reactions to unemployment can be seen to be far too reductionist.

Evidence that other labour market phenomena can affect mental health

There is already some evidence that labour market phenomena other than unemployment can affect an individual's mental health, but the literature is small and fragmented by comparison to that relating to unemployment. There has, of course, been a considerable amount of interest in the effects of differing employment environments on psychological functioning (and some attempts to use the same analytical tools to study that as to study unemployment, most noticeably Warr's 'vitamin' model (1987)). Winefield, Winefield, Tiggemann & Goldney (1991) and Winefield, Tiggemann & Goldney (1988) found evidence that employed young people who expressed low levels of job satisfaction had psychological well-being scores as low as the unemployed group, considerably below the levels measured in the satisfied employed group. But, whilst studies such as these have usually focused on the nature of the work in jobs, they have tended to ignore labour market conditions per se. The literature on the psychological effects of job insecurity is a notable exception to this (see Hartley, Jacobson, Klandermans & van Vuuren, 1991), but that literature has been small by comparison to the bulk of psychological publication on unemployment.

Aggregate studies of the economy and psychological health have, unfortunately, produced little consensus, at least in part because of the differing statistical models used by different researchers, and because of the problems associated with the use of dependent variables such as suicides, psychiatric admissions or stress-related mortality figures. Furthermore, one cannot determine from those models how much of the effects were caused by unemployment, and how many were brought about by other economic and labour market phenomena. For instance, Dooley et al. (1988) found that the psychological health of both employees and of the unemployed was found to vary inversely with the aggregate level of unemployment in their local labour market, and Jackson & Warr (1987) found differing levels of psychological well-being amongst the unemployed in different labour markets, with worse psychological health in the labour markets with higher aggregate levels of unemployment. It is little understood as to why this should be the case, but there are several studies that give us some clues to possible mechanisms:

Fineman's (1983, 1987) qualitative studies and follow-ups with white-collar males who had suffered redundancies have found some instances of men who seem to cope better with unemployment than with employment under very adverse labour market positions. For instance, in one telling quote, a mathematics graduate who had experienced a number of poor, insecure jobs between spells of unemployment finally decided that life was less stressful in unemployment than in such unsatisfactory and unpredictable jobs: 'I've done absolutely nothing about finding work. Since unemployment my life has been much more pleasant' (1987, p. 273). Fineman also finds that even long after a redundancy there is a legacy effect, for instance some individuals continue to be very anxious about job security long after re-employment.

Another example of individuals suffering a worst threat to their psychological health in employment than in unemployment comes from Kasl & Cobb's (1982) classic study of a redundancy, where they found that the threat or anticipation of unemployment was as harmful as unemployment itself; once the employees that they were studying had been given notice of redundancies, the period before the actual lay-off was, on average, more stressful than the unemployment that followed. However, like many studies of plant closures, Kasl & Cobb's research was conducted during times of relatively low levels of unemployment; Gordus, Jarley & Ferman (1981) warn that plant closures that eject workers into sluggish labour markets may have much worse aftermaths.

Evidence from a number of cross-sectional, longitudinal and qualitative designs have found a link between job insecurity and a number of psychological and psychosomatic variables (see Burchell, 1992 or Hartley et al., 1991 for a review of these studies). These findings are consistent with the Agency theory advanced to account for the psychological impact of unemployment (Fryer, 1986; Fryer & Payne, 1984). Fryer & McKenna (1989) found that short, finite spells of unemployment with guaranteed reemployment can actually be experienced positively. Jobs that do not allow individuals the opportunity to rely on and plan for their future provide an alternative support for a 'frustrated Agency' perspective.

Another link between labour market conditions and psychological health has been described by Elder (see, for example, Elder & Caspi, 1988). Using cohort studies started in the 1920s and 1930s, they found a link between the psychological well-being of children and the extent of the economic losses that their families suffered during the Great Depression, caused at least in part by the worst parenting styles in cases of more extreme loss of family income. However, whilst that programme of research was unusual in the details collected from different sources (such as interviews with parents) the exact nature of the economic causes and correlates of the loss of income were not recorded for analysis. Other studies of families afflicted by unemployment have also found clear evidence that the psychological effects of unemployment go beyond the workforce. Fagin & Little (1984) found depression in wives of unemployed men, particularly if they did not work themselves, and also found some evidence of psychological problems amongst the children including disturbed feeding habits, minor gastrointestinal complaints, sleeping difficulties, proneness to accidents and behavioural disorders. Allatt & Yeandle's ethnographic study (1992) reports on the problems that confront families with a young person who is unemployed. Moser, Fox & Jones (1984) demonstrated convincingly, using the OPCS longitudinal study, that the wives of unemployed men also suffered increased levels of mortality. This serves as a reminder that even those who are not in the workforce or on the claimant count will be victims of economic recession. It is interesting to note at this point that, if employees suffer lower levels of psychological well-being in times of higher unemployment, then it is also likely that families could suffer greater stress in times of higher unemployment, even if no member of that family were to experience unemployment directly.

One study that comes close to understanding the link between economic change and psychological health tested several models, each making different assumptions about the link between the economy, the experience of good and bad life-events and psychological health (Catalano & Dooley, 1983). The strongest fit was for a model which assumed that economic downturns brought about negative life-events which in turn caused increases in reported symptoms. Not surprisingly, however, for early attempts to understand complex phenomena, the pattern of results was not entirely straightforward. When tested on different socio-economic groups the model only held for the middle of the three groups.(2)

Detailed studies of the nature of the economic lives of individuals in times of economic recession and boom are needed to understand the processes involved. One could hypothesize what sort of effects one would expect to moderate economic change and mental health--loss of income, reduced opportunity for skill use and promotion (both within an enterprise and by moving to better jobs in other organizations) and redundancies. But these sorts of labour market phenomena need to be understood at a more detailed level than is currently the case, particularly in the psychological literature.

As argued in an earlier section, the relationships between these processes are not as simple as the psychological research often assumes. Furthermore, little is known of the psychological correlates of such processes. It is unlikely, though, that the research methods relied upon by psychologists in the study of employment, or the research methods employed by other disciplines in studying labour markets, can be used straightforwardly in this new challenge. For instance, whilst the objective behaviour of individuals in the labour market are routinely studied through retrospective techniques such as work-history analyses, it is unlikely that one could quantify or integrate psychological health into such designs with any accuracy; psychological health is simply not amenable to retrospective measurement. New methods will have to be brought into play if we are to investigate the manner in which economic events threaten individual's mental health within a framework that reflects the very real but intricate and sometimes enigmatic nature of labour markets.

Policy implications

Taken as a whole, the research on unemployment emphasizes the psychologically harmful nature of unemployment per se compared to employment. Because of the widespread acceptance of these arguments amongst the voting public, it has become common for governments to use the reduction in unemployment as part of their political rhetoric in justifying harsher labour market legislation. For instance, in Britain the 1985 White Paper on employment heralded changes such as relaxing health and safety standards and unfair dismissal protection to offset 'the severest disadvantage of them all--the lack of a job' (White Paper on Employment, 1985, p. 20). It may well be the case that the use of such rhetoric is selective and manipulative. For instance, in the run-up to the 1992 election the UK Conservatives hardly mentioned unemployment except to make compassionate references to the plight of the unemployed when alleging that the UK Labour Party's planned minimum wage legislation would increase unemployment. Analogous arguments have also been used by the British Government in opposition to European Community attempts to raise labour standards through the Social Charter. Yet, in Norman Lamont's, the Chancellor of the Exchequer, own words, unemployment was '. . . a price well worth paying . . .' (Treasury Questions, Hansard, 1991), referring to it as a tool to manipulate the level of inflation.

As a result of the changes brought about by the UK Conservative government's labour market legislation, there has been a rise in the number of individuals in insecure jobs in Britain (Rubery, 1989). If these labour market changes worsen conditions for a large number of employees then it is quite likely that the net effect on the psychological health of the workforce will be negative even if they were to be effective in reducing unemployment. Whilst in these cases it could be argued that the levels of unemployment were more of an excuse than a reason for instituting those changes, nevertheless the psychological literature has indirectly lent its support to those interventions. There is no guarantee therefore that a more widely focused literature on the psychological effects of government attempts to control the economy through bringing about a reduction in the demand for labour would have a noticeable impact on government policy, but at least psychologists might not lend themselves so readily to being used to justify the worsening of employment conditions.


I would like to thank Lynda Burchell, two anonymous referees and the editor for their very helpful comments on the first draft of this paper.

1 Even allowing for the fact these counts of claimants underestimate the number of people who would like to be working if there were more suitable jobs available, and that this underestimation has become successively more acute with the Conservative government's numerous changes in the method of measuring unemployment, the general argument remains the same.

2 It should also be mentioned in passing that this is one of the few studies that could have detected negative psychological effects of economic booms as well as recessions, another underresearched domain.


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Title Annotation:Special Issue: Marienthal and Beyond: 20th Century Research on Unemployment and Mental Health
Author:Burchell, Brendan
Publication:Journal of Occupational and Organizational Psychology
Date:Dec 1, 1992
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