Early career health shocks and long-run labour market outcomes

The economic literature on health shocks and labour market outcomes largely focuses on acute health shocks at older ages, leaving limited evidence on long-term labour-market consequences. By examining the consequences of incident hospital-diagnosed back disorders among early-career workers, this study addresses that gap in the literature. We link population-wide Danish administrative registers (1996-2017) to follow a cohort of 157,692 individuals who were aged 28-31 in 2006. We apply a staggered difference-in-differences design, to identify the impact on both earnings (productivity) and disposable income (financial burden). We find persistent adverse effects: eight years post-diagnosis, annual earnings have declined by 8% for men and 13% for women relative to the controls. We document a distinct gender divergence in the mechanisms driving these losses. While men primarily adjust through the intensive margin (temporary reduction in hours) and stabilize over time, women face a progressive decline driven by labour market exit (extensive margin). Although the Danish welfare system acts as a significant buffer, compensating for 55-65% of earnings losses, a substantial private financial burden persists. These findings suggest that early-career back disorder shocks initiate long-term trajectories of cumulative disadvantage, particularly for women.