Millions with mental illness stuck in ‘low income trap’ due to long term benefits cuts and barriers to employment

  • A vicious cycle of low wages, low employment prospects and long term benefits cuts has left millions of people with mental health problems stuck with significantly reduced income levels compared to the wider population.
  • New research by the Money and Mental Health Policy Institute shows that annual median income for people with common mental health conditions is £8,400 less than for the rest of the population.
  • This greater financial precarity means that people with mental health problems are more exposed to financial hardship as the economic impact of the pandemic is felt.

The new Money and Mental Health research (published today) examines the income gap for people with mental health problems compared to the rest of the population, and the long term factors which drive these disparities.

The charity estimates that annual median income in 2020 for the 6.4m people in England affected by anxiety and depression is £18,200, compared to £26,600 for those without mental health problems — a gap of £8,400.

The research also explores the long term factors which have driven the ‘mental income gap’ — revealing that people with mental health problems are:

  • More likely to be out of work: Less than half (48%) of people with a mental health problem in the UK were in employment in 2018-19 — compared to four in five (79%) of those without mental health problems.
  • More likely to be in the lowest paid occupations: 37% of workers with a mental health problem are in the three lowest paid types of occupations such as shop assistants, kitchen staff and care workers. This is compared to only 26% of the wider workforce who are in these occupations.
  • More reliant on benefits, and more affected by the freeze on benefits payments For example, nearly half of all Employment Support Allowance (ESA) claimants have a mental health problem. This group has been hit particularly hard by the freeze on working-age benefits — in 2019, ESA was worth £750 less per year in real terms than it would have been if it had risen in line with the state pension during the freeze.

The research warns that the low wage and employment prospects for people with mental health problems have largely been driven by inflexible — and sometimes discriminatory — employer attitudes, and the failure to offer flexible working arrangements for those affected by mental health problems.

For people who are unable to work due to their mental health, the inadequate level of benefits payments — with ESA payments equivalent to just 12.5% of typical median weekly earnings — as well as the freeze on these payments, have contributed most to low levels of income.

Katie Alpin, Interim Chief Executive of the Money and Mental Health Policy Institute, said:

“The mental health income gap is longstanding and entrenched, and it causes misery for people who are already vulnerable. There’s a clear risk that the pandemic will compound these problems, as people with mental health problems are much more exposed to the financial hardships it could bring.

“But the current crisis also offers a critical opportunity to start to close the income gap for those affected by mental health problems. For example, a willingness from employers to offer current flexible working practices on a more long-term basis would make a huge difference in helping people with mental health problems to access jobs and thrive in the workplace.

“Equally, a more generous post-Covid benefits settlement will be vital in lifting more people with mental health problems out of the low income trap.”