The Impact of Economic Shocks on Our Minds

A STUDY NEGATIVELY CORRELATES MENTAL WELLBEING WITH THE EFFECTS OF GLOBALIZATION AND IN PARTICULAR THE EXPOSURE OF ONE'S SECTOR OF EMPLOYMENT TO INTERNATIONAL COMPETITION. A LOOMING THREAT TO OUR MENTAL HEALTH THAT PLACES A BURDEN ON THE NATIONAL HEALTH SYSTEM AND IS FAST WORSENING WITH THE COVID19 CRISIS

by Italo Colantone, Associate Professor, Dept. of Economics
Translated by Alex Foti

Mental health data around the world are cause of worry. According to the WHO, between 2007 and 2017 there was a 13% increase in mental disorders, and about 20% of children and adolescents now suffer from them. The economic cost of mental illness is high. The WHO estimates that anxiety and depression, the two most common mental diseases, cost alone up to $1 trillion per year.
 
These discouraging data are unfortunately destined to worsen due to the ongoing Covid-19 pandemic. This is occurring for several reasons. Healthcare workers are exposed to higher levels of stress, as are other categories of workers in the front line of the epidemic. The lives of students are turned upside down due to the interruption of normal activities, with serious disruption of the organization of family life. The reduction of social contact has a negative impact on individual mental well-being. In general, on society hovers a climate of great uncertainty about the future, which feeds increasing levels of anxiety and mental stress.
 
A look at the economic literature allows us to collect many useful elements of analysis to understand what is happening. In fact, several economists have studied over the years the relationship between socio-economic conditions and mental health. In particular, in a study recently published together with Rosario Crinò and Laura Ogliari, we analyzed the relationship between globalization and mental health in a sample of individuals residing in the United Kingdom. Specifically, we have related the evolution of the mental health to the exposure to international competition in one's sector of employment.
 
The results tell us that increased competitive pressure on the job leads to worsening mental health. The effect is greater for more vulnerable individuals, both in terms of less favorable socio-economic characteristics, and more problematic mental conditions at the start. The effect extends from workers to other family members. In particular, greater competitive pressure on men generates a worsening of the mental health of their partners, and a deterioration of the living conditions of children.
 
What are the channels through which an economic shock such as international competition negatively affects mental health? One is quite obvious: some individuals lose their jobs due to increased competition, perhaps because the company they work for loses market share and goes bankrupt. Job loss is clearly linked to increased stress, as are reductions in wages for those who at least keep their jobs. To these channels, less visible mechanisms must be added, linked to the extent to which individuals feel satisfied with their jobs, both in terms of content and in terms of employment stability and career prospects. All these factors worsen in a situation of greater competitive pressures, which means tougher work rhythms, greater uncertainty and deteriorating expectations about the future. This leads to a worsening in the mental conditions of workers.
 
Unfortunately, many of the dynamics I have just described can be easily extended to the conditions we have been experiencing in these months of pandemic. It is therefore essential to think about strengthening health services not only with regard to prevention and treatment directly linked to Covid-19, but also for everything concerning the mental care and well-being of individuals, a fundamental aspect of a society's quality of life.