Job Displacement and Mental Healthcare: Treatment Responses after Mass Layoffs

We study how job displacement impacts mental healthcare use in Australia, where a universal public health insurance system subsidises psychological therapy and prescription medications. Using linked administrative data and a difference-in-differences design around mass layoffs, together with complementary national panel survey evidence, we find that displacement generates substantial and persistent earnings losses and is associated with a temporary deterioration in self-reported mental health. Mental health service use, including general practitioner mental health consultations and psychological therapy, increases around displacement and is concentrated in zero charge care, while the use of antidepressant and anxiolytic medications responds much less. Predicted service responses are substantially larger among workers with lower pre-displacement earnings and those already engaged with mental healthcare before displacement. Together, the results suggest that the mental healthcare response to job displacement is shaped by what the health system makes accessible. When mental health services are publicly subsidised and can be delivered at zero patient charge, adjustment occurs primarily through services rather than medication.