UBI, Mental Health and Economic Growth

Vishal Wilde FRSA examines the link between financial insecurity and mental ill health, and whether a Universal Basic Income could make a difference.

In August 2017 the Roosevelt Institute published a report entitled “Modeling the Macroeconomic Effects of a Universal Basic Income” where they estimated that, “under the smallest spending scenario, $250 per month for each child, GDP is 0.79% larger than under the baseline forecast after eight years” whilst, “the largest cash program - $1,000 for all adults annually – expands the economy by 12.56% over the baseline after eight years.”

However, whilst the estimates are impressive and they take marginal propensities to consume across income groups into account, an issue is that they may still significantly underestimate the benefit a Universal Basic Income when considering the health benefits (which was not incorporated). Although the study focused on estimates for the USA, the observations made here would apply to studies on a UBI across countries more broadly. 

In 2011, the World Economic Forum and the Harvard School of Public Health found that Non-communicable diseases (NCDs) “already pose a substantial economic burden and this burden will evolve into a staggering one over the next two decades.” Their macroeconomic simulations suggested “a cumulative output loss of $47 trillion over the next two decades” with respect to “cardiovascular disease, chronic respiratory disease, cancer, diabetes and mental health”. Furthermore, they found that “cardiovascular disease and mental health conditions are the dominant contributors to the global economic burden of NCDs.”

Turning to the UK, the OECD wrote in 2014 that “mental ill-health costs the economy an estimated GBP 70 billion, equivalent to 4.5% of GDP, through lost productivity, social benefits and health care.” In a 2015 publication, the Mental Health Foundation echoed the 2014 OECD estimate and wrote that “the economic cost to the UK is £70bn to £100bn” whilst in 2009/10 the Centre for Mental Health pinned the costs to England as being £105.2bn (this figure being echoed by the Department of Health in February 2016 but, nevertheless, being cross-checked by Full Fact as being an “uncertain estimate”). Clearly, the enormous economic costs of mental health – both for the UK and the world more broadly – is beyond doubt (even if estimates are uncertain). 

At the same time, there have been investigations into the link between money and mental health. In a June 2016 report, the Money and Mental Health Policy Institute elucidate the bidirectional relationship at play here – “Money and mental health are intricately linked. Mental health problems make it harder to manage your finances and living in financial stress can harm your mental health.”

From analysing the experiences of nearly 5,500 people, one of their findings was that “86% of respondents said their financial situation had made their mental health problems worse.” Similarly, in a 2014 review, the Mental Health Foundation stated that “Poverty increases the risk of mental health problems and can be both a causal factor and a consequence of mental ill health.” Thus, it is intuitively plausible to see why the implementation of a Universal Basic Income could significantly improve many peoples’ mental health (although a formal simulation is beyond the scope of this publication) especially when considering that many peoples’ mental health conditions go undiagnosed and/or untreated. Furthermore, this improvement of peoples’ mental health would help tackle the ongoing productivity puzzle that plagues economies globally. 

Ultimately, when considering how a Universal Basic Income could improve economic growth, it would be fruitful to also consider the various health benefits – for mental health especially – that could work to further stimulate economic growth. Indeed, given that the 2011 report from the World Economic Forum and the Harvard School of Public Health projects that output losses will speed up over time (Figure 4, p.31), both the costs of not implementing a UBI and the benefits of implementing one will increase. However, it must be conceded that precisely revised estimates would be difficult and these aspects can be challenging to incorporate in a sophisticated manner but, even in relatively rudimentary capacities, they can be acknowledged with ease.