Pandemic‐induced job loss and mental health: Evidence from a moderated mediation model

Rui Yao and Jie Zhang

Review of Development Economics, 2025, vol. 29, issue 2, 1273-1293

Abstract: The strict anti‐contagion measures at the start of the COVID‐19 pandemic implemented by the US governments led to surges in the unemployment rate. Earlier studies have brought to light the association between job loss and mental disorders, as well as the link between financial hardship and mental health. Yet the mechanisms responsible for these relationships remain fragmentary and the specific role of pandemic‐induced job loss within this mechanism is unexplored. Addressing this gap, our study examines the mediating effect of financial hardship on the link between pandemic‐induced job loss and mental health during the COVID‐19 crisis and how income moderates this mediation. Findings show that respondents experienced elevated mental disorders primarily through the direct non‐financial aspect of pandemic‐induced job loss. Low‐income respondents suffered relatively more indirectly through financial hardship, while high‐income respondents were relatively more affected by the non‐financial aspects of job loss. Moreover, low‐income respondents showed higher resilience against mental disorders due to pandemic‐induced job loss. Our findings provide important implications for theory, policy, and practice in addressing the mental health impact of job loss during national crisis such as the COVID‐19 pandemic.

Date: 2025
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