Economic insecurity arises from a fear of being exposed to adverse economic events from which an individual may have difficulty recovering. Adverse events include unemployment, an involuntary reduction in working hours, or a sudden loss of income, among other things. Since economic insecurity arises from fears regarding the future, rather than actual events, it can affect any individual within a population. In this way, it is distinct from poverty which, by definition, affects only the poorest in society.
The issue of economic insecurity within developed economies has become increasingly relevant in the past three decades, initially due to jobs being offshored in response to global competition and, more recently, due to changes in working practices which have led to an increase of non-standard employment contracts.
As employment relationships change, understanding the impact of economic insecurity on population health becomes more important. Many studies provide unequivocal evidence of the negative effects of unemployment on mental health. Less attention has been paid to the mental health effects of insecurity related to work or expected financial hardship, and how these compare to experiencing an adverse economic event such as a loss of income. In our paper, we examine the extent to which these sources of economic insecurity cause changes in mental health.
The data used within the analysis comes from the British Household Panel Survey. Participants in the survey answered the same set of questions once per year. Mental health was measured by scoring responses to the twelve questions from a validated screening tool for psychological distress. Questions asking individuals how they feel about their job security and financial security were used to measure economic insecurity. We also identified individuals who experienced a 25% loss in income.
Our results show that dissatisfaction with current job security, which can be considered as being in insecure employment, is the most damaging form of insecurity for mental health. This is particularly true for males, for which the experience of insecure employment is almost twice as damaging to mental health than for an equivalent female. We attribute this gender effect to the pressure of social norms in Great Britain which continue to place a greater expectation on males to be in employment, relative to females, and so continuing employment is more central to males’ mental health.
No gender differences are found in the effects of financial insecurity or income loss. However, while financial insecurity does negatively impact mental health, we find no evidence that the experience of losing income affects mental health. The latter result has also been found by researchers using Australian data, and we conjecture that this income volatility does not impact on mental health, as it is either planned or anticipated.
The pattern which emerges from our results is that the fear of future adverse economic events is more damaging to mental health than the experience of adverse economic events. Furthermore, the future event that is feared need not ever occur for the mental health loss to be incurred. For example, individuals suffer the same level of mental health loss due to insecure employment regardless of any unemployment experiences in the following year. Also, mental health effects from all forms of insecurity are experienced equally regardless of the current level of income, so a high earner suffering from insecure employment suffers the same mental health effects as a lower earner in an equivalent position.
It is clear from our research that insecure employment is a major issue affecting the population’s mental health. Each year the mental health of around 12% of our sample was at risk due to this issue. The true figure of those affected within the workforce is likely to be much higher, as we did not include self-employed, temporary, or part-time workers within our sample.
Although the mental health effects of insecure employment will not always result in mental illness, the effects are economically significant. A recent government-commissioned independent review estimated that poor mental health costs businesses around £37bn per year, equivalent to approximately 2% of the GDP. The major proportion of these costs result from lower productivity as employees continue to attend work while suffering from reduced mental health.
There are substantial potential benefits to addressing insecure employment, both in terms of productivity and population mental health. The UK government has proposed to improve many aspects of job quality through the Good Work Plan. However, effective interventions are not yet known. In future research, we aim to identify effective policies, at both the firm and national levels, which will allow the benefits of addressing insecure employment to be realised.