Lasting Scars: The Impact of Depression in Early Adulthood on Subsequent Labor Market Outcomes

A growing body of evidence indicates that poor health early in life can leave lasting scars on adult health and economic outcomes. While much of this literature focuses on childhood experiences, mechanisms generating these lasting effects – recurrence of illness and interruption of human capital accumulation – are not limited to childhood. In this study, we examine how an episode of depression experienced in early adulthood affects subsequent labor market outcomes. We find that, at age 50, people who had met diagnostic criteria for depression when surveyed at ages 27-35 earn 10% lower hourly wages (conditional on occupation) and work 120-180 fewer hours annually, together generating 24% lower annual wage incomes. A portion of this income penalty (21-39%) occurs because depression is often a chronic condition, recurring later in life. But a substantial share (25-55%) occurs because depression in early adulthood disrupts human capital accumulation, by reducing work experience and by influencing selection into occupations with skill distributions that offer lower potential for wage growth. These lingering effects of early depression reinforce the importance of early and multifaceted intervention to address depression and its follow-on effects in the workplace.