The Latent Benefits Of Work

Each year, the White House Council of Economic Advisers publishes the Economic Report of the President. The CEA is led by politically appointed academics, and thus you need to take it as given that the annual report will be supportive of the presidential administration. On the other side, the academic economists are there for relatively short-term appointments (typically a few years), and will typically be returning to academia, so their reputation for making arguments based on evidence and theory is (at least somewhat) at stake. In the 2026 Economic Report published earlier this year, Chapter 9 is titled “Work Means More Than Making a Living: Labor, Challenges, and Opportunity,” and it starts with a discussion of what it calles the “latent” value of work, focused on dimensions beyond quantities produced and compensation paid. The report argues:

Work is a center of meaning, a means of identity and purpose, and a powerful node of human relationship and connection (Durkheim 1897; Jahoda 1982). Understanding these “latent” benefits of work is essential for crafting policies that truly support human welfare. … [F]our striking facts are documented: work improves health and extends life by years; work increases happiness and reduces depression; work helps to develop the knowledge and skill of individuals; and work provides a webbing of social connection and community.

On the link from work to improved health:

If work were merely a source of stress to be escaped, one would expect job separation to improve health outcomes and reduce mortality. The evidence shows precisely the opposite. Workers displaced through mass layoffs experience 50–100 percent higher mortality rates in subsequent years, shortening life expectancy by 1 to 1.5 years on average (Sullivan and von Wachter 2009). Given standard estimates of the value of a statistical life from the U.S. Department of Health and Human Services (DHS 2025), the reduction in life expectancy costs about $300,000–$500,000. These are not workers who lost jobs due to poor health or performance; they were displaced through plant closures and downsizing that had nothing to do with individual circumstances. The excess deaths span multiple causes—strokes, heart attacks, accidents, suicide, and complications from substance abuse—suggesting that job loss triggers a cascade of physical and mental health deterioration (Eliason and Storrie 2009; Browning and Heinesen 2012). These studies, which are from Sweden and Denmark—countries with government healthcare—demonstrate that the health consequences of job loss operate through psychological and social pathways rather than simply through the loss of medical access.

The most compelling evidence that these effects transcend income loss comes from retirement. Fitzpatrick and Moore (2018) exploit the sharp discontinuity in retirement timing at age 62, when Social Security eligibility begins. Roughly one-third of Americans retire precisely at this threshold. This age-based threshold creates a natural experiment, since retirement timing is driven by policy rather than individual health status. Despite having their income partially replaced through Social Security, these new retirees experience animmediate 2 percent increase in mortality risk—implying that retirement itself increases mortality risk by about 6 percent for those who choose it. The effect is particularly pronounced for men, who may especially derive their identity from work.

On how work increases happiness and reduces depression:

Beyond its effects on physical health, work shapes human emotional well-being in ways that contradict people’s stated preferences. People tell themselves that they work for the weekend, yet the evidence suggests that they find more fulfillment in Monday morning than Saturday afternoon. Csikszentmihalyi and LeFevre’s (1989) pioneering study revealed this paradox elegantly. Using experience sampling methodology—giving subjects beepers that prompted them to record their activities and feelings at random moments—they found that people reported higher levels of happiness, engagement, and energy while working than during their leisure time. This finding challenges classical economic theory, which treats labor as “disutility”—a cost paid in lost leisure to obtain income. Despite the common cultural narrative that frames work as drudgery, people appear to derive deep satisfaction from productive effort and the structure it provides. …

Research on unemployment duration reinforces this pattern. Bayer and Juessen (2015) demonstrate that short unemployment spells have minimal effects on well-being, while persistent joblessness drives significant unhappiness. This suggests that the psychological benefits of work operate through multiple channels—not just the act of working, but also the security of knowing you will have work. Krueger and Mueller (2012) reinforce this interpretation, documenting how laid-off workers experience not just depression but also an explicit sense of meaninglessness.

On how work helps to develop knowledge and skill:

The modern workplace demands constant adaptation—new software, evolving best practices, shifting market demands. Workers meet these challenges not usually through formal training but by daily problem-solving alongside colleagues. This learning-by-doing, which is nearly invisible when it occurs, becomes painfully apparent only in its absence (Arrow 1962).

Bessen (2016) documents how workers master new technologies, primarily through on-the-job experimentation rather than formal education. Similarly, Jarosch, Oberfield, and Rossi-Hansberg (2021) show that workers learn substantially from their peers, with an increase in coworker quality raising own wages by 2 to 3 percent permanently of 1 standard deviation. These knowledge spillovers happen through informal channels—watching a colleague handle a difficult client, debugging code together, sharing Excel shortcuts across workstations. The cumulative returns from this workplace learning are substantial and persistent. Consider a young worker in his 20s considering whether to take a gap year after completing his training. One additional year of work experience increases his annual earnings by 3.0 to 3.6 percent throughout the rest of his career (Altonji and Williams 1992). For an average worker earning $60,000 at age 25, this translates into about $86,400 in additional lifetime earnings before retirement—all from a single additional year of early career experience. The workplace functions as an unstructured but irreplaceable quasi-university where learning happens through osmosis and the mother of all: necessity.

On how work provides a webbing of social connection and community:

[T]he benefits of work extend beyond the individual psyche and skill set to the social fabric that binds people together. Work is where people form friendships, find mentors, and build the weak ties that sociologists have long recognized as essential for opportunity and belonging. When work disappears, so does this essential social infrastructure. … [J]ob separation triggers sustained social isolation. … Unlike depression, which spikes immediately after a job loss, loneliness emerges gradually and persists. Ten years after separation from work, both unemployed and retired workers report significantly higher loneliness than when they were working. …

These individual costs ripple outward through communities. When unemployment rises locally, even those who keep their jobs experience decreased well-being—Helliwell and Huang (2014) find the effects equivalent to a 4 percent decline in household income. This spillover reflects the breakdown of social networks: when your colleague loses their job, you lose a colleague. When enough people lose work, the entire community fabric begins to fray. The social consequences of joblessness extend into people’s most intimate relationships. Work shapes not just friendships but also family formation. Autor, Dorn, and Hanson (2019) demonstrate that regions hit by trade-induced job losses experience collapsing marriage markets, particularly for noncollege men whose diminished employment prospects make them less attractive as partners. The results are fewer marriages, more single-parent households, and declining fertility—a cascade of social disconnections that begin with economic displacement.

The broad takeaway from these arguments is that work is more than a contractual relationship between an employer and an employee. Work involves human beings, with all their human issues of health, happiness, skills, and social connectedness. The US economy benefits considerably from its ability to reallocate labor between employers, industries, and places. But the costs of that reallocation are much lower when workers voluntarily leave one job to take another one, rather than when workers lose a job involuntarily.