Maintaining or restoring the mental health of the working age population during the Covid-19 crisis will not only have direct benefits for those affected. It will also have positive side effects for the performance of the UK’s labour market – and ultimately for national wealth.
In any year, the economic cost of mental ill health is considerable. One recent estimate for the UK puts it at £119 billion in 2019/20 (O'Shea and Bell, 2020). To put this in context, that sum is a little over 5% of the country’s GDP, a figure that is roughly comparable to public spending on education. Tackling the personal and economic costs of mental ill health has thus rightly become a priority for social scientists, medical scientists and policy-makers alike.
These numbers will rise, the evidence suggests. Data from the UK Household Longitudinal Study (UKHLS) show a deterioration in average mental health scores of 10.8% between the end of 2018 and April 2020, which is almost twice the deterioration seen in the previous four years (Banks and Xu, 2020). Researchers using statistical forecasting models estimate that up to ten million people are likely to require new or additional mental health support as a direct consequence of the pandemic (O’Shea, 2020).
Since they are based on different methodologies, the results from these two studies are not easily comparable. Yet both predict large increases in the incidence of mental ill health in the UK. Both also find that the mental health impact of the pandemic will be unequal, hitting some vulnerable groups harder.
How is the Covid-19 crisis affecting mental health?
The Covid-19 crisis affects mental health in multiple ways:
- First, there is the ‘direct’ impact of the pandemic. The most immediate effects include anxiety about exposure to the virus (both for oneself and others), pain and fatigue caused by the illness itself, grief from bereavement, and possible direct impacts of the virus on brain function (Holmes et al, 2020).
- Second, the policy response to the pandemic affects mental health, particularly through the curtailing of civil liberties, and the feelings of isolation and loneliness arising from lockdown and quarantine measures.
- Third, there are issues around the availability and the mode of delivery of mental healthcare.
- Fourth, there are likely to be strong and persistent indirect repercussions on mental health due to widespread job and income loss, changes in working conditions and economic uncertainty.
This last channel of transmission is the focus of this article.
The labour market and mental health: what are the interactions?
The interaction between careers and mental (or indeed physical) health goes both ways. First, ill health affects labour supply (the willingness and/or ability to work) and productivity. It has been widely documented – both in economic and medical research – that mentally ill people are less likely to be in work and that those who are in work are more likely to go on sick leave or to underperform on the job (Layard, 2017; de Graaf et al, 2012).
Conversely, being out of work, being at (real or perceived) risk of losing one’s job, or working in a stress-loaded job affects future mental health. This too has been recognized by economists (for example, Janke et al, 2020a, 2020b; Jolivet and Postel-Vinay, 2020) and medical scientists (Fryers et al, 2003; Haw et al, 2015).
Labour market frictions – particularly the difficulties of finding the ‘right job’ in an economic downturn – and poor mental health are mutually reinforcing factors that may create a vicious cycle. For example, people who become depressed or anxious following a bereavement or illness may have to quit their job as a consequence of depression. The period of non-employment that ensues may, in itself, aggravate the mental illness.
Moreover, if and when they get better and start looking for a new job, labour market frictions will prevent them from finding a job – let alone a job with a ‘good fit’ – immediately: they may have to either stay unemployed until they find a suitable job or settle for a stressful or poorly paid job, with either outcome potentially inflicting further damage on their mental health.
The evidence
A large body of research focuses on the health repercussions of recessions, showing that economic downturns have substantial and persistent adverse impacts on people’s health, both mental and physical. Indeed, which of the pandemic itself or the recession will end up having the larger impact on morbidity and mortality is a genuine question (Banks et al, 2020).
A particularly relevant study is by Janke et al (2020a). Using 15 years of data from the UK’s Labour Force Survey (UKLFS), the researchers estimate the effects of fluctuations in employment rates on five broad types of chronic health conditions. They estimate that the 2008/09 global financial crisis led to an 8.5% average increase in the incidence of chronic illness.
Among conditions that the study considers, by far the strongest effect is on mental health conditions, the prevalence of which are estimated to have increased by roughly 20% in the two to three years following the crash. Worryingly, the authors emphasise that the rise in mental ill health has been gradual and persistent: it has not been reversed since the end of the global financial crisis, even though the economy has recovered.
Trying to extrapolate from these results to make predictions about the current pandemic is both difficult and concerning. First, while the 2008/09 recession was deep by historical standards, the Covid-19 downturn is likely to be much deeper still. At the time of writing, the UK employment rate is holding up, but it is widely expected to drop by much more than the ‘mere’ 5% experienced in the financial crisis. Unemployment is already increasing, and hours worked are falling.
Second, the adverse mental health impact of the Covid-19-induced recession is likely to be compounded by other aspects of the pandemic, including bereavement, social isolation and changes in working conditions.
In addition, the same study finds considerable inequalities in the mental health effects of the global financial crisis across local areas (Janke et al, 2020a). Worse affected areas tend to be more economically deprived, with citizens that are more likely to be blue-collar workers, older and with poorer pre-crisis health. Those findings tally with other predictions, which identify a number of vulnerable groups, for example, singling out NHS and other key workers who ‘might need treatment for post-traumatic distress, high psychological distress and burnout’ (O’Shea, 2020).
In addition to these risks, new research has highlighted the relevance of ‘job stress contents’ – measured either from worker surveys such as the American Time Use Survey, or from occupation-level data sets such as O*NET (see below) – as drivers of mental health. Quantifying the health impact of job stress contents is important in the long run, as evidence is emerging that the contents of jobs are shifting away from routine, physically hazardous manual tasks and towards more stressful tasks with stronger cognitive content (Kaplan and Schulhofer-Wohl, 2018).
It is especially relevant in the context of Covid-19, as there is ample evidence that the crisis is not only increasing the stress levels associated with certain occupations (NHS, social care and other key workers), but also causing reallocation towards occupations that are potentially more stressful.
Figure 1: Exposure to stress in a selection of occupations
Source: O*NET, Jolivet and Postel-Vinay (2020)
My own recent research has involved constructing a microeconomic model of individual careers and mental health outcomes that explicitly accounts for the type of two-way interactions between work and mental health described above (Jolivet and Postel-Vinay, 2020). Importantly, we also track differences across jobs in levels of exposure to stress (see Figure 1).
Exposure to stress is measured for each occupation using information on the task contents of occupations found in O*NET, an American data base that measures the contents of occupations in terms of hundreds of different descriptors. Some of these descriptors – for example, ‘Time Pressure’, ‘Consequence of Error’ or ‘Stress Tolerance’ – are directly relevant to mental health. Information on individual health and careers is taken from the UKHLS.
Our study reaches a number of conclusions. First, working in a stressful job has a detrimental effect on future mental health. So does working in a low-paid job. These effects are small in magnitude for year-on-year health changes, but become sizeable when accumulated over several years.
Second, in line with other studies, we find that the loss of one’s job has large and lasting negative effects not only on employment and earnings, but also on mental health, especially for workers with pre-existing mental health issues. Conversely, while the impact of an episode of mental ill health (a bout of depression or anxiety caused, for example, by a major life event such as bereavement or divorce) on future mental health dissipates after three to four years on average, the effects of such a health event on careers can last longer. The two-way interaction between health and work is therefore key to understanding the persistence of both health and labour market shocks.
Moreover, people’s responses to depression differ: while an adverse mental health shock has little impact on the careers of workers in low-stress jobs, it induces some workers employed in more difficult jobs to quit and enter a vicious cycle of poor health and bad job matches.
Third, we quantify the value that workers place on good mental health or low levels of job stress by estimating how much pay they would be willing to give up to be (or stay) in good mental health, or to work in a low-stress job. Those values depend on individual circumstances, and are, on average, considerable.
For example, 30-year-old men working in high-stress jobs are willing to give up more than 13% of their pay to avoid becoming depressed. And they are willing to forgo 15% to 22% of their pay (depending on their current mental health state) to go from a high-stress job to a medium-stress job.
These numbers give an idea of the welfare cost of mental ill health, and also of the welfare cost of employing individuals with fragile mental health in stress-loaded jobs. As mentioned above, this is particularly important today, with the pandemic causing a large reallocation of the labour force, with the potential to increase mismatch in the ‘stress dimension’.
For example, building on previous research, the Institute for Fiscal Studies (IFS) has set up a real-time job vacancy tracker during the pandemic (Costa Dias et al, 2020). This tracker shows that the majority of new job openings since the start of the pandemic are in occupations that are characterised by a high level of exposure to the disease, and close proximity to others in the workplace. Both of these are potential stress factors, at least so long as the virus remains a risk.
Moreover, the broad sector that has been hiring the most since the start of the pandemic is, by far, the health and social care sector. Studies concur that occupations in that sector are at the high end of the stress scale in Figure 1 (O’Shea, 2020; Jolivet and Postel-Vinay, 2020). Indeed, Figure 2 shows that the vacancies posted between April and August 2020 are in occupations that are more stressful than over the same period in 2019, a difference that is entirely explained by the higher share of vacancies in health and social care occupations since the start of the crisis.
Figure 2: Average exposure to stress among posted vacancies, 2019 and 2020
Source: O*NET, Find-a-Job, and author's calculations. Smoothed using a 28-day trailing moving average
Policies
The evidence suggests that the policy response to the Covid-19 crisis should not only safeguard workers from job and income loss, but should also aim to protect workers from the adverse mental health impacts of job displacement, job mismatch and increased levels of job stress. Research shows that failing to do so would be very costly, both economically (as it would mean lower employment and productivity) and in terms of wellbeing (as it would increase the incidence of mental ill health).
The good news is that the various labour market policies put in place in response to the crisis, while not directly intended to address the deterioration in mental health, will help to do so nonetheless by limiting job losses and involuntary job reallocation, and by mitigating income losses of those in work.
The policies implemented since the start of the crisis are mostly geared first, to preserving existing employment relationships, and second, to cushioning income losses of people in work. Even under the most optimistic expectations about the success of those policies, joblessness is very likely to rise substantially over the coming months. (As the chancellor of the exchequer Rishi Sunak bluntly put it when explaining HM Treasury support: ‘I can’t save every job’.)
The scarring effects of unemployment on people’s future careers have been abundantly documented by years of research in labour economics. Economics and mental health science research have further shown the damage that periods of unemployment can do to people’s mental health, with knock-on effects on future career outcomes.
For those reasons, it may be worth rethinking the balance of policies aiming to support workers, which at the moment are very much focused on supporting those in work, as opposed to those out of work. The current level of help provided to displaced workers – not only financial help but also support in their search for a suitable job in a challenging labour market – is probably insufficient, especially given the prospect of a large increase in the jobless rate.
Failing to recognise that well-designed labour market policies can have substantial preventative impacts against mental ill health will lead to underestimating the benefits of such policies. It is therefore essential that labour market policy decisions be made bearing in mind the associated mental health implications.
Remedial policies that address mental ill health (particularly evidence-based psychotherapies) have long been advocated by health economists as effective, cheap and yet under-provided (Layard, 2017; Zala et al, 2019). The evidence presented here suggests that maintaining or restoring the mental health of the working age population will not only have direct beneficial effects for the welfare of those affected, but will also have positive side effects for labour market performance and, ultimately, for national wealth.
Where can I find out more?
- Recessions and health: the long-term health consequences of responses to the coronavirus: James Banks, Heidi Karjalainen and Carol Propper summarise some of the evidence of the impact of recessions on health in this IFS briefing note.
- Job vacancies during the Covid-19 pandemic: Monica Costa Dias, Norris Keiller, Fabien Postel-Vinay and Xiaowei Xu present virtually real-time information from a daily census of all job adverts posted on Find a Job, a recruitment website maintained by the Department for Work and Pensions, in this IFS briefing note.
- The economics of mental health: IZA World of Labor summary by Richard Layard.
- The impact of COVID-19 on chronic health in the UK: Katharina Janke, Kevin Lee, Carol Propper, Kalvinder Shields and Michael Shields suggest that the economic downturn could result in around 900,000 more people of working age developing a long-term chronic condition.
- Covid-19 and the nation’s mental health, October 2020: Forecasting needs and risks in the UK: Centre for Mental Health briefing by Nick O’Shea.
