Economic Outcomes & Mental Health
This paper discusses the relationship between economic factors and societal well-being for theUnited States over the post World War II period. This is an interesting time to consider because during thisperiod both wage inequality and poverty initially declined and then began to increase. We examine howchanges in the distribution of wage income and poverty generate conditions which may contribute to anintensification of negative mental health outcomes thereby affecting societal well-being. At the outset wewould like to point out that there is controversy regarding the causes of mental health problems. Seriousdisagreement exists regarding the degree of psychological, cultural, biological, social, and economic factorsthat underlie mental health problems such as anxiety, stress, suicide, and criminal behavior. In many cases,these behavioral outcomes are the result of complex interactions of individual and environmental factors inconjunction with feedback effects making the determination of causality by any one factor difficult.Economic factors, however, appear to have a reasonably large impact on mental health. In Cantril’s 1965study surveying factors mentioned most frequently by Americans in discussing their hopes, approximately65 percent of the survey respondents related personal hopes to economic factors. Davis (1965, p. 68) writesthat "study after study shows that mental health is positively related to socioeconomic status in a variety of measures of mental health and SES." We examine both theoretical and empirical aspects of therelationship between the economic factors of wage inequality and poverty and mental health.
Mental Health and the Distribution of Income: Absolute and Relative Income Effects
Economists have generally assumed that economic growth results in greater economic welfare orhappiness. While cross sectional evidence is overwhelming for a positive relationship between income andsubjective well-being -- defined as a positive evaluation of one’s life -- real increases in income within acountry over time may not make people happier (see Easterlin, 1973 and Deiner, 1984, for a summary of this literature). Extensive evaluations of surveys of happiness for the United States over the period 1946 to1970 indicate:"
In all societies, more money for the individual typically means more individual happiness. However, raising the incomes of all does not increase the happiness of all
. The happiness-incomerelations provides a classic example of the logical fallacy of composition -
what is true for theindividual is not true for society as a whole
." (Easterlin, 1973, p. 4; author’s italics)