There are many potential pathways in the income health relationship. Problems arise in examining the effect of income loss primarily because of difficulties in disentangling income from the effect of the labour market, but also because of the heterogenous nature of health variables. Psychological, rather than physical, health is important because younger populations are unlikely to manifest clinical evidence of physical disease in the short term.
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However, biological pathways of stress indicate that this can result in increased mortality and morbidity in the longer term.The study follows the example of work that has harnessed the Great Recession to examine income loss, but in contrast to previous work, this study examines the relationship of disposable income and mental health.
The study exploits disposable, rather than gross, income, because of economic theory relating disposable income to consumption and research demonstrating the role of consumption in wellbeing. Data from the period of the Great Recession in Ireland allows the examination of changes in disposable income due to government policies that reduced public expenditure and increased taxation.
Using three waves of panel data from the Growing Up in Ireland study a fixed effects approach is taken to examine disposable income and the mental health of the mothers of young children.
A balanced panel is used which results in 6821 individuals being studied over the three waves. The primary dependent variable of interest is depression, scored using a short form of the Centre for Epidemiological Depression Scale (CES-D), although additional outcomes of interest include treatment for a mental health condition, and measures of parental stress using the Parental Stress Scale.There is a statistically significant relationship between changes in depression score and disposable income loss over the three waves.
This relationship is independent of labour market loss during that time. The effect of income loss is predominantly seen for those who are homeowners. Subjective reports of being in mortgage or rent arrears are also associated with an increase in depression score.
This group, comprising the mothers of young children, is particularly interesting in view of the credit constraints experienced by younger households during the financial crisis in Ireland.
Both sets of results are consistent with qualitative studies which have shown that mortgage difficulties can lead to depression, anxiety and poor mental health, and that high status groups experience shame and self-blame when they experience a financial loss. It remains to be seen if this will have a long-term effect on the mental health of either the mothers or their children.