Health-related exit from employment before and during the COVID-19 pandemic in Norway: Analysis of population-wide register data 2013-2021

People with health problems experience various labor market disadvantages, such as hiring discrimination and heightened risk of firing, but the impact of deteriorating economic conditions on health-related labor market mobility remains poorly understood. The strength of the downturn/crisis will most likely make a difference. During minor downturns, when few employees are made redundant, health-related exit may occur frequently since employers prefer to keep those with good health on the payroll. However, during major economic crises, when large-scale downsizing and firm closures abound, there will be less discretionary room for employers. Thus, some mechanisms that usually are damaging for people with health problems (e.g., seniority rules and negative connotations), can be neutralized, ultimately leading to smaller health differentials in labor market outcomes. The current study used population-wide administrative register data, covering the years 2013-2021, to examine health-related exit from employment (to unemployment/social assistance) before and during the COVID-19 pandemic in Norway. The pandemic spurred a major crisis on the Norwegian labor market and led to a record-high unemployment rate of 10.6 percent in March 2020. Restricting the analytical samples to labor market insiders, linear probability models showed that previous recipients of health-related benefits had a higher unemployment likelihood in the pre-crisis year 2019. The relative importance of poor health changed nonnegligibly, however, during the COVID-19 pandemic. When identical statistical analyses were run on the crisis year 2020, health-related exit from employment was dampened. Yet, this labor market equalization was not followed by smaller health differentials in work income in 2021, mainly because people with good health retained or regained decent-paying jobs when the economic conditions improved again. In conclusion, major economic crises can lead to an equalization of labor market disadvantages for people with health problems, but health-related inequalities may reemerge when the economy recovers.