The causes and consequences of household financial struggles: a spotlight on health

As inflation continues apace and COVID-19 support schemes have mostly come to an end, there is increasing nervousness about the cost of living crisis that might hit UK households. I’m not aware of comprehensive up-to-date metrics on this, but one indicator is the number of people in ONS’s bi-weekly “Opinions and Lifestyle Survey” that say their household finances are being impacted by the pandemic. Only 14% of people in early January said this — significantly fewer than the around 35% of people who said so in April 2020.

However, their relatively low number is no consolation for those people under financial strain. Nor are the causes and consequences of their financial troubles uniform or straightforward. [I mentioned in an earlier Tweet a couple of patterns: for example, people who live in rented accommodation are much more likely to report that their financial situation is “very difficult”. Somewhat surprisingly, it is neither the young or the old, but the middle aged, that are least likely to say they are “living comfortably” or “doing alright”.]

As is often the case, there will be many factors in peoples’ lives which are both causes of a difficult financial situation (e.g., poor health can cause someone to have to take on less-well-paid work) as well as a consequence of financial struggles (e.g., being constantly stressed out about one’s financial situation can cause poor mental and physical health). In the chart above, I’ve had a go at looking at some metrics on the health angle, in particular.

The left hand panel shows that the poorer the financial circumstances (the rows, from “living comfortably” to “finding it very difficult”), the greater the proportion of people who also have physical health issues. In this case, nearly half of the people who said their financial situation was very difficult also said that their health stopped them from doing moderate physical activites, such as vacuuming or moving a table. Such health challenges were present among only 22% of those rating their financial situation as “living comfortably”. [As mentioned above, the pattern is similar across all age groups, and if anything, most pronounced for the middle aged.]

The right hand panel looks at mental health. There are many relevant metrics in the Understanding Society dataset, but one that intrigued me was a quastion looking at the impact of mental health on someone’s capacity for productive work. Respondents were asked: “During the past four weeks, how much of the time did you do work or other regular daily activities less carefully than usual as a result of any emotional problems, such as feeling depressed or anxious?”

The pattern is rather stark. There were considerably more people stating that depression or anxiety had caused them to work less carefully among those who also considered their financial situation difficult. For example, among those saying they were finding their finances “very difficult”, 70% also said that they had worked less carefully due to mental health issues at least some of the time. In contrast, a similarly work-limiting situation was reported by only 30% of those who considered themselves to be “living comfortably”.

I know none of this is “new news”. The associations between poor physical and mental health, someone’s financial situation, and their ability to work productively, have been identified a long time ago. It has also been recognised that these interlinkages can result in negative cycles, whereby someone’s ability to get out of financial trouble is made harder due to the negative consequences of said financial issues on their health and wellbeing. As ever, a human-centric, multifaceted and multidisciplinary approach is likely needed to create the circumstances where financial hardship can be reduced.

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I help complex organisations make the right strategic decisions through innovative, insightful and incisive analysis and recommendations.

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Tera Allas

I help complex organisations make the right strategic decisions through innovative, insightful and incisive analysis and recommendations.