Poor mental health and smoking: interactive impact on wages.

Background: Studies have found important effects of poor mental health on labor market outcomes. The positive association between poor mental health and smoking has also been documented. This is the first study to document the separate and interactive impacts of smoking and mental health on wages.
Aim: The primary aim of this study is to analyze the effect of poor mental health on wages while controlling for smoking status, and the interaction of poor mental health and smoking. We conduct separate regressions by gender.
Methodology: We use data from the Community Tracking Survey for years 1996, 1998 and 2000. This survey interviews 60,000 people per cycle in the United States and collects detailed information on mental health status, smoking history and labor market outcomes. We use a two-step regression procedure to adjust for the fact that smoking and poor mental health may affect the labor market participation decision as well as wages. Separate regressions are estimated for men and women.
Results and Discussion: Our results confirm that poor mental health is negatively associated with wages, as is current smoking, controlling for other factors. The impact of poor mental health is associated with an almost 8% reduction in wages for males and a bit more than a 4% decline for women in our most basic specification. We add to the literature by finding that the impact of poor mental health varies substantially by smoking status for males. Men who are in both poor mental health and who smoke have the largest associated reduction (-16.3%) in wage rates, while the interaction between poor mental health and smoking is insignificant for women.
Limitations: While the data set has rich detail on smoking history and information on mental health, the data set lacks information on why former smokers quit and diagnosis of mental health disorders. The complex relationships among wages, mental health, and smoking also hinder determination of causality.
Conclusions and Implications: Our findings suggest that both smoking and mental health are important factors in the determinations of wages and that the impact of mental health on wage rates varies by smoking status, at least for males. Our findings suggest that those who both smoke and have mental health problems, especially males, have the greatest productivity losses and are thus in the greatest need of interventions that address both issues jointly.
Future Research: Further economics research should address the difficult issue of the potential endogeneity of mental health, smoking, and their interactions in regressions of wages. Clinical and worksite research could be aimed at determining those work environments and treatments that are effective in helping those with mental health problems who smoke to become more productive.