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Financial losses during the pandemic took a toll on mental health

During the peak of the COVID-19 pandemic, substantial economic disruptions led to widespread financial instability, affecting millions globally through reduced earnings or job losses. A team of researchers led by the University of South Australia (UniSA) has recently delved into the mental health impacts of these financial challenges.

The study, which analyzed data from China, Japan, and South Korea during the early stages of the pandemic, found that severe economic shocks had profound effects on mental health, leading to increased anxiety, sleeping difficulties, boredom, and loneliness. 

“This paper investigates the causal effects of income reduction on mental health deterioration during the pandemic,” wrote the researchers. “Our study augments previous studies by testing not only the impact of the actual or experienced income reduction on mental health but also how expected income reductions in upcoming months can play a role in individuals’ mental health.”

Anticipation of financial losses during the pandemic

The findings were particularly significant regarding the anticipation of future income loss, which appeared to have a more substantial impact on mental well-being than actual income reductions.

“Our research shows that mental health issues are more likely to occur due to anticipated income losses rather than actual losses,” said co-author Tony Cavoli, an associate professor of economics at UniSA. “Although women are generally more likely to experience mental health problems, in many instances in our study, we found that men were more likely to experience anxiety than women in response to either actual or expected losses in their income.”

“Firstly, in societies that are perhaps seen as more traditional in terms of household and familial structures, it is possible that males feel greater societal pressure to remain employed. Secondly, those industries for which there was a higher likelihood of experiencing income reductions were more likely to have greater participation by males,” he added.

Psychological responses to economic uncertainty

The economic impact of the pandemic was stark, with the Australian Bureau of Statistics estimating a $47 billion hit to Australia’s economy due to lockdowns, decreased demand, reduced work hours, and significant job losses.

Cavoli emphasized the importance of understanding these psychological responses to economic uncertainty. “We have an insight into how people dealt with income shocks during stressful times, and this is a really important opportunity for future policy implications, particularly around the design of government support and other interventions.”

“Responses from governments, for example, early in times of crisis may help individuals manage possible anxieties arising from economic uncertainties.”

Pandemic financial losses and mental health

“We have conducted several sets of estimates and this result is robust across all model specifications; mental health issues are more likely to occur due to anticipated income losses than actual losses,” wrote the researchers.

“The adverse effects of income reduction on psychological well-being were also associated with age and living area and, notably with gender where women are generally more likely to have mental well-being deterioration compared to men; though are in many instances less likely to experience mental deterioration in response to either actual or expected income shocks.”

Job losses during the Covid pandemic 

The COVID-19 pandemic led to significant job losses across the globe, largely due to widespread business closures, lockdowns, and economic slowdowns. Many sectors, especially hospitality, travel, retail, and leisure, faced severe disruptions, resulting in massive layoffs and furloughs. 

The impact was profound in countries heavily reliant on industries that require physical presence and face-to-face interactions. In contrast, sectors like technology and digital services often saw growth, benefiting from the shift towards remote work and increased reliance on digital platforms.

Governments responded with various measures to mitigate unemployment, including subsidies for businesses retaining employees, enhanced unemployment benefits, and incentives for sectors severely affected by the pandemic. Despite these efforts, the economic fallout from the pandemic pushed unemployment rates to levels not seen since the Great Depression in some areas, highlighting the profound and widespread nature of job disruptions during this period. 

The recovery of jobs has been uneven, with some sectors bouncing back quickly while others are still struggling to reach pre-pandemic employment levels.

The study is published in the journal Evolution Human Biology.


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