Unemployment has a detrimental impact on mental health, as does poor quality employment. This long read is concerned mainly with unemployment and mental health. Entering the pandemic, unemployment in the UK was at a historic low, but has since begun to rise, and is expected to rise further, as a result of pandemic restrictions.

Policy measures to help manage the COVID-19 pandemic have now been in place for over a year. Two areas that have felt the continued impact of those restrictions are the UK’s labour market and the mental health of the population. The complex connection between mental health and unemployment means that systems designed to address one area must not neglect the other area.

Despite the extension of the Coronavirus Job Retention Scheme to the end of September, the unemployment rate is still projected to reach a 7-year high by the end of 2021. Policies announced in the Budget are rightly focused on economic recovery and tackling the expected rise in unemployment. However, their impact will fall short unless they also tackle the mental health consequences of the pandemic and unemployment.

What is the connection between mental health and unemployment?

Unemployment – not having a job and actively seeking work – has consistently been found to have a negative impact on a range of health outcomes. There are several mechanisms by which unemployment could harm health:

• through stress and reduced self-esteem arising from the loss of the day-to-day structure of work or the stigma associated with unemployment
• as a result of financial hardship, insecurity and reduced future earnings potential, leaving people with stress (which damages health) 
• from the social security system itself, which can have a negative impact on mental health through the claims process, work capability testing and job search conditions.

The health consequences of unemployment have been shown to increase with duration – for mental health and life satisfaction as well as for physical health. Pandemic restrictions have led to extended periods of reduced income, job loss or unemployment, and the long duration of these circumstances is a particular cause for concern.

Policymakers’ interest in unemployment, particularly for young people, partly stems from the long-term scarring effect that a period of unemployment can have on future earnings potential. However, research also suggests that there are long-term mental health scarring effects of youth unemployment (and multiple spells of unemployment) during the life course.

The impact of rising unemployment on mental health

Forthcoming research by Thomson, Katikireddi et al explores the impact of job loss, income change and different economic and welfare policies on mental health. Using provisional estimates, it is possible to provide an indication of the impact on mental health of the predicted rise in unemployment by the coming winter.

OBR projections suggest that by the final quarter of 2021, the unemployment rate will reach 6.5%, equivalent to an additional 940,000 unemployed people in the UK compared with the last quarter of 2019. Based on the age profile of unemployment in the latest ONS data and the relationship identified in the Katikireddi’s research, we estimate this would result in an extra 200,000 people with poor mental health over the same period. In comparison, our analysis of the January wave of the UK Household Longitudinal Study (UKHLS) suggests that 700,000 unemployed people had poor mental health in January 2021. Taken together with the projected increase, this suggests a total of 800,000 unemployed people with poor mental health by the end of 2021.

Our estimate of the increase in poor mental health accounts for people moving from employment into unemployment and people remaining unemployed over this period. The same research highlights that (on average) moving into employment from unemployment helps reduce poor mental health, emphasising the need for policies that create jobs and help people find jobs. However, this is not true for all forms of work. Moving from unemployment into poor quality work can lead to a deterioration in mental health, as can adverse interactions with the social security system. Thus, increasing employment alone, without these wider considerations, cannot be relied upon to support the nation’s mental health recovery.

Unemployment and mental health during the pandemic

Rates of both unemployment and poor mental health have increased during the pandemic. Unemployment is expected to rise further throughout this year, peaking when furloughing ends. Deteriorating mental health has been partly due to the social impact of pandemic restrictions, but as our analysis has previously shown, it is also related to economic uncertainty, job loss and unemployment. With the economic consequences yet to be fully felt, a further deterioration in mental health for those bearing the brunt is likely.

Rising unemployment

The impact of the pandemic on employment has been difficult to assess, because traditional employment measures do not adequately capture pandemic activity such as the temporary shutdown of some sectors and the move to reduced hours (or none at all) due to the furlough scheme. Despite these initiatives, the unemployment rate rose from 3.8% in the 3 months to November 2019 to 5.0% a year later. With pandemic support schemes set to end this autumn, a further rise in unemployment is expected.

The risk of unemployment for different groups

Our independent analysis in this section largely makes use of a survey designed by the Resolution Foundation, funded by the Health Foundation, and conducted by YouGov between 22–26 January 2021 (see full details at the end of this long read). It has a sample size of 6,389 adults aged 18–64. Results are weighted to be representative of the population of that age group.

Before the pandemic, some groups – such as younger people and those from minority ethnic groups – were more likely to be unemployed. These groups have also been hardest hit by the effect of pandemic restrictions through either unemployment, loss of work or reduced pay.

Figure 1 highlights this pattern, showing the reported unemployment rate for the working age population (those aged 18–64) in January 2021 by different characteristics. Younger people, men, people from minority ethnic groups and lower skilled workers were all more likely to be unemployed than other parts of the population. Prior to the pandemic, while the unemployment rate was lower, the relative likelihood of unemployment for different groups was similar.

Figure 1

The social security system and job support schemes currently fail to properly account for the needs of people with existing mental health problems. Indeed, they can exacerbate them and even create new ones. Without better design, pre-existing elements of these schemes risk worsening the experience of individuals who need support.

Support for incomes

The main forms of income related benefits are Universal Credit (UC), Jobseeker’s Allowance (JSA) and Employment and Support Allowance (ESA). People with health conditions, including mental health conditions, which limit their ability to work can also claim an additional income support payment.

Even before the pandemic, the inadequacy of the UK’s social safety net placed families at risk of poverty and poor health. The standard allowances of Universal Credit were increased by £20 per week for the 2020/21 financial year to provide additional financial support during the pandemic. The Budget 2021 has extended this uplift until October – so while much-needed income support will be provided for longer, many families face a sudden drop in income later in the year.

The system coped well with the huge surge in social support claims during the first wave of the pandemic. However, around 290,000 people who attempted to claim during the early stages of the pandemic were deemed ‘failed claimants’. This was for reasons such as possessing savings, or having a partner continuing to earn. After losing their jobs, many individuals had to turn to food banks or borrow money. People who tried to claim continued to have high outgoings and the strain of ‘scraping by’ was reflected in their self-reported mental health.

The Job Retention Scheme (known as furloughing) has provided a much-needed form of earnings replacement for over 11 million people. The scheme has been extended several times because of the ongoing pandemic and currently set to end in September 2021. Self-employed people also received grants through the Self-Employment Income Support Scheme – although this was more poorly targeted, with almost 30% of self-employed workers (1.5 million people) losing income as a result of the pandemic but being ineligible for the scheme.

Claiming support and conditionality

Universal Credit is also designed to help people into work or to earn more, but there are strict conditions attached. A key part of the eligibility assessment is agreeing to a ‘claimant commitment’, which sets expectations of the amount of time people should spend looking for work. The standard expectation is to spend 35 hours a week seeking work (for those with caring responsibilities or existing work commitments, the hours expected are reduced). However, experiences of benefit recipients suggest that the circumstances of people with mental health problems often fail to be duly considered in setting these expectations.

During the first wave of the pandemic, the suspension of job seeking conditions for all UC claimants helped to mitigate the stress of searching for work, particularly when many sectors were closed. This blanket suspension has now ended, with work coaches instead applying discretion based on individual and local circumstances. It is important that this discretion takes into account mental health needs as much as caring responsibilities.

Common mental disorders are higher among those who are receiving benefits. Such disorders include anxiety, depression, attention deficit hyperactivity disorder (ADHD) and post-traumatic stress disorder (PTSD). Despite many claimants citing mental ill health as the root cause of unemployment, the application process and assessment regime has been found to exacerbate their mental health problems.

The introduction of Universal Credit in 2013 led to an increase in reported psychological distress attributed to the claims process and the threat of sanctions leaving claimants feeling extremely low. The shift to online services created new inequality in access for those facing digital barriers, and the lack of human input also exacerbated feelings of isolation and loneliness.

During the pandemic the shift by the Department for Work and Pensions (DWP) to an approach of ‘we’ll call you, don’t call us’ was welcomed by UC claimants, as it enabled the system and staff to ‘become more human’. This helped to address fundamental flaws in the application process that caused distress and exacerbated an already stressful time for people likely to be experiencing mental health problems.

Support to move into work

Employment programmes such as JETS and RESTART are new schemes to help reduce unemployment, focusing on short- and long-term unemployment respectively. These programmes focus on practical skills for getting jobs, with sessions on CV writing, interview technique and signposting job opportunities. Despite the greater likelihood of poor mental health among the groups targeted by these policies, there is no explicit focus or recognition of how they affect (and can help improve) mental health.

However, in forthcoming research, Coutts demonstrates that good quality active labour market policies (ALMPs) contain a number of crucial elements which provide social support, reduce loneliness and get someone back into a structured routine. Key to supporting mental health is a focus on self-efficacy, and the psychological resources to cope with the stresses of unemployment. As the evidence shows, it is possible through these programmes to protect people against the mental health challenges of unemployment as well as help them into work.

Major randomised control trials in the United States and Finland show that the intensiveness of support matters. For those struggling with their mental health and detached from work for longest, these courses should last a week, for 5 hours per day, and should be offered every 2 months until an individual finds a job. The aim, in response to rising unemployment and low job creation, is to provide people with stability and support, not make their lives more of a struggle (which would further damage wellbeing, confidence and motivation).

For women in particular, these schemes are shown to have real ability to reduce the negative health issues associated with being out of work. Existing UK programmes can (and should) be easily adapted to better support mental health of jobseekers.

The Kickstart scheme provides funding to employers to create job placements for 16–24 year olds on Universal Credit. This is predominantly a scheme to directly subsidise jobs to encourage employers to hire young people. However, it does not provide employers with mental health support in relation to their employees, nor does it incentivise the creation of high-quality roles.

The government is already taking some steps that will (indirectly) support mental health and prevent a significant rise in unemployment, through the further extension to the furlough scheme, for example – which in turn may help to keep unemployment lower until certain sectors can reopen. At the same time, the temporary extension of the £20 per week uplift to UC will provide further, if time limited, income relief to lower income families. Making this uplift permanent would be a crucial step towards providing an adequate safety net for those facing unemployment.

However, these measures are only indirectly supporting better mental health, and there will still be increasing numbers of unemployed people through this year and next, with a risk of longer term unemployment rising too. Large numbers of people have also spent considerable time not working during the pandemic, creating a risk that they are losing skills necessary to work.

To address these risks, there are two areas in which further policy change can better support mental health while tackling unemployment.

1. Ease conditionality and improve job support

• While significant parts of local job markets remain slow, the social security system’s conditionality regime could be eased, in order to remove the additional strain placed on claimants’ mental health.
• Finding good quality work that fits with other needs and responsibilities – such as childcare commitments – could be prioritised over finding any work.
• The DWP’s ‘don’t call us, we’ll call you’ policy had a positive impact for claimants during the pandemic, and could be maintained for the handling of new claims in future.
• Personalised support from the Jobcentre Plus could be tailored to the mental health needs of claimants. This will require advisors and assessors to undergo specific mental health training in how to manage and support individuals with different mental health conditions and needs.
• Disability Employment Advisers should be suitably trained, have manageable caseloads and access to adequate resources to support claimants experiencing mental health problems. Regular, mandatory disability equality training should also be provided to Jobcentre staff.

2. Embed mental health support within employment programmes

• New employment programmes should be designed to a high standard taking into account their impact on mental health and wellbeing. Regular and intensive support that provides stability for individuals is critical.
• Providers should be accountable against outcome measures that include mental health, wellbeing and longevity and quality of work placements. This will reduce further periods of avoidable worklessness and ensure that the work found is not detrimental to people’s mental health.
• Addressing skill gaps for lower skilled workers will help them find better quality work. Similarly, allowing flexible working and upskilling employees may promote sustainable employment. This could be achieved through a ‘quality guarantee’ being built into employment programmes and a greater focus on in-work progression.
• Individual Placement and Support services could be fully integrated into UK employability provision. This would provide greater access to specialised intensive support for people with poor mental health and help improve employment outcomes for this group.

A key element of the UK’s recovery from the COVID-19 pandemic will be maintaining high employment levels. A significant proportion of people who are currently unemployed have mental health problems, such as depression and anxiety. Supporting these individuals into work will be critical to achieving higher employment rates and economic prosperity.

Support from government can take several forms. First, it is important that policies withdrawing the economic support made available during the pandemic are applied in ways that do not exacerbate mental ill health – such as causing sudden drops in income by the abrupt withdrawal of the furlough scheme, or ending the Universal Credit uplift of £20 per week. Second, targeted policy changes are essential to help people back to work, and into quality work. These could include tailoring employment support services for people with poor mental health as well as helping to create flexible employment opportunities.

More fundamentally, mental health needs to be taken much more seriously by government. A healthy population is one of the nation’s most important assets – and good mental health, as well as our physical health, is a vital input into our future prosperity that improves people’s wellbeing, their productivity and their ability to participate in society.