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Impacts of Layoffs and Government Assistance on Mental Health during COVID-19: An Evidence-Based Study of the United States

This study evaluates the impact of unemployment and government financial assistance during the COVID-19 pandemic on the working-age population’s mental health and further examines the differential impacts between urban and non-urban groups, as well as African American (AA) and non-African American groups. Based on the COVID-19 Household Impact Survey, four measures of mental health conditions (nervous, depressed, lonely, and hopeless) are constructed. Our empirical analysis applies the ordinal regression model (ordered logit model) that takes both the week and regional factors into consideration to control for potential time effects and time-invariant confounders varying across regions. The results show that government aid only mitigates the psychological symptoms for the group in non-urban areas, with no significant impacts on the urban group. On the other hand, the AA working-age group experiences similar or more favorable mental health than other ethnic groups, while government aid does not alleviate the mental pressure for the AA group. Therefore, government interventions should recognize the heterogeneity of impacts on socioeconomic groups within the target population.