In this article we attempt to convince you that mental health creates a big enough problem that economic policies need to be designed to address the issue, and that doing so, would benefit the UK economy. Mental health sits at the centre of what happiness economics is trying to achieve. Our view is that there are two ways that policymakers should look to influence the happiness distribution in a country: by either shifting the bottom end upwards or by shifting the whole distribution upwards. The former aims to make the most miserable in society happier and the latter aims to improve happiness for all in society.
Mental health affects a lot of people in the UK – 17.6% of the UK population have been diagnosed with either a mental health or substance use disorder. And there are many more people that go undiagnosed. In addition, according to a recent poll completed by YouGov for the Prince’s Trust, the number of young people in the UK who say they do not believe that life is worth living has doubled in the last decade. In 2009, 9% of 16-25 year-olds disagreed with the statement that “life is really worth living”, but that has now risen to 18%. Moreover, 27% of young people do not feel that their life has a sense of purpose – which is one of the most important ingredients of a happy life.
The main way that mental health impacts the economy is through the labour market. By the labour market, we refer to those who are in work (employees), those who are looking for work (unemployed people) and those who offer work (employers). Employment is central to many people’s live and identities. The probability of developing a mental health illness increases the longer an individual is unemployed. This can develop into a vicious cycle, which we have named the unemployment trap. It’s similar to a poverty trap theory, often used for developing economies. Essentially, the idea is that the longer an individual is unemployed, the more likely they are to develop a mental health illness, they then begin to lose motivation and confidence, which reduces the probability of finding a new job further as time passes. Policies aimed developing short term employment contracts to break this cycle could have large benefits to the UK economy, as well as lead to more efficient use of government resource.
On the employment side, the onus is on the employer to make the right decisions, leading to benefits for their firm and the wider economy. The current view is that the best approach is a flexible one from the employer. Different employees require a different response as mental health illnesses and people are not the same. Through firm-wide destigmatisation and taking a flexible approach employee loyalty will increase in the firm, leading to longer tenures and therefore an increased likelihood that employees will become experts in their role.
In order to create conditions within society to generate the greatest possible happiness and the least possible misery across the population, policymakers need to know the causes of happiness and misery. Therefore, we have chosen to study the correlates of life satisfaction and mental health, comparing across two methods of doing so, using within-country and cross-country data. The results showed that within country data performs better than cross country data. Although the results using cross country data did improve when we reduced the sample to a subset of countries that are more comparable to each other. The correlates using within country data were calculated by the UN as part of their World Happiness Report. The correlates using cross-country data were calculated by us and we have linked the data we used and results tables here. There is plenty more detail on this section of the paper in the full article available below, where we explain how to interpret the correlations. We also explain some of the interesting trends we have already been able to pick up regarding what makes a happy life.
Policies aimed at providing solutions to the challenges posed by mental health will have economic benefits that go beyond the labour market. In economics, we call these second order effects, since the majority of the first order effects come through the labour market. There are many second order effects and these will be explored further in a future article focused on policy design.
For more detail on mental health and the UK economy, please click on the link below or check out the video above.