Macroeconomic Effect of Mental Health Problems

Mental health problems are among the most complicated and challenging of all illnesses, with considerable economic implications. It is conventional to distinguish between common mental disorders (including depression, generalized anxiety disorder, panic disorder, obsessive–compulsive disorder and post-traumatic stress, with an overall prevalence of 15–20%) and severe mental disorders (particularly schizophrenia and bipolar disorder, with a combined prevalence of approximately 2–3%). Alcohol and drug abuse are usually included under the mental health heading, as is suicide or suicidal ideation. The World Health Organization (WHO) also classifies epilepsy as a mental disorder, although many countries’ national health systems do not (and it is not included in this article; intellectual disabilities and neurological disorders are also excluded). It is estimated that approximately 6% of children and young people aged under 18 years have behavioral problems serious enough to be classified as psychiatric disorders, and 4% have emotional disorders. Alzheimer’s disease and other dementias become increasingly prevalent with age: 5% for people aged 65 years or over but 20% for those aged 85 years or over.

According to the WHO, mental, substance use, and neurological disorders as a group account for approximately 14% of the global burden of disease (measured in disabilityadjusted life years), which is roughly 30% of the total global burden of noncommunicable disease. Both proportions are expected to grow over time, particularly in lowand middleincome countries (LAMICs).

The large disease burden follows from the high prevalence and chronic course of most mental disorders and is associated with high costs (see Economic Impacts). Few mental disorders can be cured, although symptom alleviation through evidence-based treatment is a realistic goal for many people. Primary prevention of illness is achievable for some common mental disorders and some people, although illness etiology remains only partially understood. What distinguishes mental from other illnesses is a particularly troublesome combination of at least four interconnected features: links to suicide and self-harm; associations with dangerous behavior; widespread public fear, stigma and discrimination; and restrictions to individual choice and liberty because of assumed or ascribed inability or danger.

There are wide gaps between underlying and treated prevalence, particularly in LAMICs where WHO estimate that 76–85% of serious cases have received no treatment in the previous 12 months; the figure in high-income countries is said to be 35–50%. This is why the WHO launched the Mental Health Gap Action Program (mhGAP) to support and encourage strategic planners and policy makers – as well as international donors – to tackle the ‘burden’ of untreated disorders.

Poor access to evidence-based care and treatment is a key factor in the overall disease burden. One reason is simply that policy makers fail to allocate sufficient funds to mental health programs, or that voluntary insurance coverage excludes some or all mental disorders. But there are other ‘resource barriers’ such as the unequal distribution of services and available treatments across regions, socioeconomic groups, genders, and age bands. Another is the inappropriateness of certain types of investment (e.g., the large, usually decrepit, dehumanizing institutions that still dominate mental health systems in some countries) and the consequent inflexibility of available resources to meet needs most cost-effectively. A further problem is a basic lack of information about what works in terms of symptom alleviation and quality-of-life enhancement or on the resource implications. In countries where health systems are primarily reliant on voluntary insurance or out-of-pocket payments, poverty is a major barrier.

Economic Impacts

Mental disorders are defined by their clinical symptoms and so impact heavily on health systems. But they have consequences across many life domains, leading to potentially wide-ranging needs for support from social care, housing, employment, criminal justice, income support, or other systems. The direct costs of treatment and care are high, but the indirect costs of mental disorders can be higher. For example, calculations for Europe in 2010 suggest that indirect costs (mainly from unemployment, absenteeism, and presenteeism) account for 38% of the total cost of anxiety disorders, 63% for mood disorders, and 69% for psychotic disorders.

There can be high opportunity costs for families because the need for unpaid care and support interferes with employment and leisure, as well as out-of-pocket payments if families subsidize treatment expenses. Estimates published by Alzheimer’s Disease International in 2010 indicate that unpaid care from family members and other unpaid carers accounts for 58% of the total costs of dementia in low-income countries, 65% in lower middle-income countries, and 40% in high-income countries. These indirect costs are largely hidden but crucial inputs. They are often overlooked in policy frameworks; this is a dangerous strategy given rapidly ageing populations, the resulting rapidly growing prevalence of dementia, and the dwindling number of family carers (because of trends toward smaller families and higher female labor force participation rates).

For the wider society, economic impacts can include the victim, fear, and criminal justice system costs of acquisitive crime by people with serious substance misuse disorders, violent crime by people experiencing florid psychotic episodes, and suicide and self-harm by people experiencing severe depression. Although in some societies there is exaggerated attribution or fear of these criminal activities, it is nevertheless the case that, for instance, 5–15% of homicides in high-income countries are committed by people with psychosis. Responses can be both appropriate and inappropriate: a high proportion of people in prison have untreated mental disorders, in many cases before their incarceration, whereas most countries have legal structures in place to compulsorily detain and treat individuals at times of crisis. These powers can too easily be abused, as in the Soviet Union and Nazi Germany, but in less dramatic ways the basic human rights of people with mental disorders are still denied – often trampled – in many societies in the present day.

Because of the enduring nature of most mental disorders, economic impacts can be seen across much of the life course, including poor employment outcomes, low incomes, continuing high use of mental health services, continuing antisocial and criminal activity, and difficulties with personal relationships. Behavioral and emotional disorders in childhood have impacts well into middle adulthood and possibly beyond.

An immediate corollary of this multiplicity and durability of economic impacts – following from the multiplicity and chronicity of needs associated with some mental disorders – is for coordinated action across budgets and systems to avoid gaps and wasteful overlaps and particularly to ensure that resources work together effectively and efficiently. Silo budgets are almost cliched but remain a substantial challenge, sometimes exacerbated by professional rivalry, narrowly framed performance assessment, and the slow churn of bureaucratic processes.

Mental Health, Employment, And Productivity

There are multiple, complex, two-way links between mental disorders and employment difficulties. People with mental disorders are at greater risk of unemployment, job insecurity, early retirement, absenteeism, presenteeism, and low salaries. However, stress, bullying, and other difficulties in the workplace are known risk factors for onset or exacerbation of common mental disorders. Psychoses, particularly schizophrenia, are most likely to emerge when people are in their late teenage years or early 20s, which is precisely when most people would make key investments in their human capital, and so these disorders have lifelong economic consequences. As it has been seen, lost productivity is the biggest contributor to the immediate costs of mental disorders but with wider consequences for household income, community prosperity, and national economic growth.

People with mental disorders – like most people – put great emphasis on employment, not only partly and obviously because it generates earnings, but also because it brings social status and social role, fosters social participation and networking, and is a major source of self-concept. Barriers to the employment of people with mental disorders will obviously include reduced abilities because of their symptoms, but endemic social stigma and widespread discrimination by employers are major challenges.

Given the close links between employment, income, personal debt, and poverty (see Mental Health, Poverty, and Debt), the complex downward spiraling relationship between mental disorders and work difficulties can be hard to break into. One set of responses, coming from strategic policy makers, is to create conditions so that employment opportunities are better, even if they are unlikely to match those available to the ‘mentally well’ population. There is also growing support for approaches that provide intensive support for employees with mental disorders and their employers in ‘open employment’ settings rather than traditional ‘sheltered workshop’ environments. The Individual Placement and Support approach, for example, has proved effective and cost-effective across many high-income countries, helping people with quite severe mental disorders to enter, remain, and sometimes thrive in the workforce, albeit with ongoing support in many cases.

Some countries have introduced legislation so that mental disorders are viewed in the same way as physical disability in terms of rights to employment and other opportunities. Some of these initiatives go hand in hand with attempts to address moral hazard concerns about criteria for income support eligibility and to counter what can easily become a dependency culture in groups with long-term conditions. Most people with mental disorders want to work are perfectly capable of working in appropriate settings, and derive therapeutic and other benefits from it. The alternatives are not only disabling, disempowering, and disadvantaging for those individuals but also costly for societies.

Employers face high productivity losses if key employees have mental disorders because losing skilled staff for short or long periods is both disruptive and expensive. Consequently, private businesses (and public and NGO sector employers, of course) have gains to make if there is appropriate preventive or ameliorative action. Employers in many countries have become more aware in recent years of the impacts on their profit margins of disrupted employment as a result of employees’ poor health, particularly poor mental health. Perhaps more gradually, employers have also become more aware of the benefits of tackling some of the associated risk factors through workplace initiatives. Some risk factors for mental disorders are within their control, such as demands made on employees, opportunities for them to participate in decision-making, promotion prospects, harassment, and bullying. Workplace well-being programs and screening initiatives for stress and other approaches have a good evidence base in support. Although attention to the bottom line – the profit margin – should be enough of a motivation to introduce such programs in some companies (provided the risks and consequences are fully appreciated), small and medium-sized enterprises may need support through tax incentives or health insurance deals.

Mental Health, Poverty, And Debt

Mental illness and poverty interact in vicious circles. Evidence from high and low-income countries shows the close relationship between mental disorders and various measures of individual economic disadvantage. Two hypotheses have been propounded. According to the social causation hypothesis, economic disadvantage such as poverty increases the risk of mental illness through augmented risk factors (e.g., financial stress, stigma, social exclusion, and malnutrition) and decreased protective factors (e.g., social capital, education). However, the social selection or ‘drift’ hypothesis argues that people with mental disorders have an increased risk of remaining or falling into poverty because of the costs of their treatment, lost or disrupted employment, and hence reduced earnings. The social causation explanation is more relevant for common mental disorders such as depression and anxiety, and the drift explanation more relevant for severe mental disorders such as schizophrenia, but the pathways are complex and evidence suggests causation in both directions for many people.


The World Bank defines poverty as marked deprivation in well-being that includes monetary (e.g., income and consumption) and nonmonetary aspects (e.g., health, education, and housing), as captured by indices measuring one dimension (e.g., absolute and relative poverty) or many (e.g., the Multidimensional Poverty Index).

In high-income countries, poverty and unemployment are known to be associated with the maintenance of common mental disorders but apparently not their onset, whereas financial strain (personal debt) is associated with both. Several epidemiological studies have found positive associations between low socioeconomic status, on the one hand, and alcohol and substance misuse, and rates of schizophrenia and major depression, on the other hand. Suicide and parasuicide are strongly associated with socioeconomic deprivation. Children in the poorest households are much more likely to suffer from conduct disorders (severe antisocial behavior) and attention-deficit hyperactivity disorders than children from more affluent households. In LAMICs, common mental disorders have been found to be positively associated with low socioeconomic status, financial stress, low social class, low educational attainment, food insecurity, and bad housing conditions. More ambiguous associations have been found with low income, unemployment, underemployment, and low consumption.

Debt and Financial Instability

Following the recent global economic downturn, the relationships between mental disorders, personal debt, and financial instability have attracted considerable interest. Personal or household debt has a two-way association with mental health. In high-income countries, the impact of financial difficulties on depression depends in part on the type of debt and whether it is ‘manageable’, but there is apparently no direct association with anxiety disorders or nonspecific mental disorders. For example, a positive association has been found between the onset of mortgage indebtedness and rent arrears and poor mental health, with men more likely to be affected in the short term and women in the long term. A negative association has been found between outstanding nonsecured debt and psychological well-being, but no association for secured debt (such as a mortgage on housing). In a LAMIC context, one study found higher rates of distress and suicide among farmers who went into debt as a result of the agricultural crisis in India, whereas another found a positive association between personal debt and suicide attempts in Pakistan.

Macroeconomic recession affects numerous determinants of mental health, such as employment and job security, productivity and earnings, socioeconomic status, and social cohesion. In high-income countries, slower economic growth and associated increases in unemployment are associated with higher suicide rates. A positive association has also been found between unemployment duration and suicide, with a noticeable increase in suicide risk shortly after mass layoffs. Macroeconomic fluctuations that lead to worsening market conditions appear to be associated with poorer mental health in those people least likely to be employed, in ethnic minority groups, and in men with lower educational attainment. A macroeconomic downturn affects not only the mental health of some adults but also of their children. The Asian economic crisis of 1997 was associated with an increase in suicide rates in the years that followed, as well as a widening of incomerelated mental health inequalities. Sociopolitical crises in Serbia and Belarus increased suicide rates, and socioeconomic upheavals in the Russian Federation were followed by increased rates of suicide and alcohol-related deaths. Agricultural crises are strong risk factors for depression and suicide attempts in South Asia.


Acknowledging the bi-directional relationship between mental illness and poverty, interventions have targeted both the causes of mental disorders and the causes of poverty. Poverty alleviation interventions, such as cash transfers and microcredit, have as a by-product the potential to address the social causation of mental illness. Mental health interventions, such as drug treatments, psychotherapy and community rehabilitation, might be primarily focused on symptom alleviation but in so doing can also address the drift into poverty. In LAMICs, the effect of mental health interventions on poverty and other economic outcomes has been found to be positive but not always significant, whereas evidence is inconclusive on the effect of financial poverty-alleviation interventions on mental illness. Asset promotion programs have mental health benefits, and the evaluation of the conditional cash transfer program Oportunidades in Mexico found a significant reduction in both depressive symptoms in mothers and behavioral problems in children. A microcredit intervention in South Africa increased perceived stress levels among recipients of small loans (both men and women) but decreased depressive symptoms in men. Debt advice and counseling services can decrease the risk of developing or exacerbating mental disorders.

Macroeconomics And Mental Health

Mental disorders have large economic impacts that are often spread well beyond health care systems as conventionally constructed. There are also persistent economic impacts across long time periods. Employment and associated productivity difficulties are common, both for people with mental disorders and their families, while disorders in childhood and adolescence reduce levels of educational attainment. Hence, the macroeconomic consequences flowing from untreated or inadequately treated mental disorders can be considerable. There is also the strong likelihood that social and economic inequalities will widen.

From the other direction, there is also strong evidence that economic difficulties experienced by individuals increase the risk of mental disorder so that countries experiencing prolonged recession will likely see growth in the prevalence of common mental disorders. Becoming unemployed, remaining unemployed for long durations, experiencing a drop in earnings or other income, moving into personal debt in ways that cannot be managed, and experiencing housing problems can all lead to lower psychological well-being and resilience, more mental health needs and alcohol misuse, higher suicide rates, greater social isolation, and worsened physical health.

Efforts are already being made to break, weaken, or respond to the links between the state of the macroeconomy and mental health-related needs, although in most countries a lot more could and should be done. The available options are many and various. They include poverty-alleviation strategies, programs to help individuals with mental disorders to get jobs, early intervention to head-off the most damaging of personal and economic consequences of disorders, investments to build community and social capital, stronger social safety nets, antistigma campaigns, workplace initiatives, alcohol price increases, school-based schemes to tackle bullying and build resilience, and personal health budgets. And, of course, the options also include the more conventional pharmacological and psychosocial treatments, family psychoeducation, respite care, liaison services between medical specialties, and reorganization of care arrangements, each in turn requiring commitment of budgets to mental health systems from governments or other funders, followed by investment in suitably trained staff and other treatment inputs.


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