Abstract
Introduction
Recent increases in cost-of-living pose a threat to the population’s mental health. Interest rates have increased sharply in the past year (Reserve Bank of Australia [RBA], 2023), while Australian household savings have dropped (Tsiaplias and Wang 2022). Pre-COVID analysis during stable economic periods using the Household, Income and Labour Dynamics in Australia survey found a consistent link between economic insecurity, reductions in income, an inability to meet expenditures and poorer mental health (Rohde et al., 2016). Others have suggested that subjective financial stress better predicts mental ill-health compared to objective financial strain (Asebedo and Wilmarth, 2017; Ryu & Fan 2023) but not ascertained which aspects are more important and whether this holds for those in employment.
This study examined the association between a range of perceived and experienced financial stressors and psychological distress in working Australians during the first COVID-19 lockdowns and restrictions, a time of high perceived financial stress.
Methods
An online cross-sectional survey was carried out between April to September 2020 among workers insured with Australia’s largest life insurer: TAL Life. An organisational email promoted the study to customers and employees who held Total Permanent Disability and/or Income Protection policies. Ethical approval was obtained from the University of Sydney.
After providing written consent, participants completed demographics and five questions about the perceived likelihood of financial insecurities happening to them during the pandemic on a scale from 1 to 100 (not likely at all to extremely likely), and whether they had personally experienced any of the five:
Losing their job.
Having difficulties paying their bills and having to take out savings or loans.
Encountering serious financial difficulties and having to apply for social welfare benefits.
Forced to drastically lower their standard of living.
Be forced to access superannuation, use savings, or liquidate investments.
Each financial insecurity was recategorised into no risk (0); low likelihood (1–49); and high likelihood (50–100). Participants also completed the Distress Questionnaire 5 assessing psychological distress (Batterham et al., 2016).
Univariate analysis assessed the association of demographics, perceived and experienced financial insecurities individually with psychological distress using t-tests and analyses of variance (ANOVAs), while Brown–Forsythe tests were used if there was unequal variance.
Hierarchical stepwise regression models explored the association of perceived and experienced financial insecurities with distress. The first model included significant demographic variables, the second model added perceived financial insecurities, and the third model added experienced insecurities.
Results
The 441 participants consisted of 53.7% males and 46.3% females, with a mean age of 44.68 years (SD = 9.52). Around 70.8% of participants possessed a university degree, and 87.1% were employed in white-collared jobs (professionals, managers, clerical and administration roles). Females (M = 9.40, SD = 3.89) had significantly higher distress than males (M = 8.64, SD = 3.43; t441 = −2.192, p = .029). Those aged 24–40 years (M = 9.90, SD = 3.87) had higher distress than those aged 41–55 years (M = 8.50, SD = 3.53; p < .001) and 56–70 years (M = 8.40, SD = 3.20; p = 0.12). Those with previous mental ill-health had significantly higher distress (M = 12.21, SD = 4.09) than those who did not (M = 7.96, SD = 2.85; t441 = −1.00, p < .001).
Participants who reported high likelihood of having to access savings or loans (22%), superannuation (17%) and apply for welfare payments (14.5%) had significantly higher distress than those with no perceived financial strain (all ps < .05), but there was no difference between those who reported high and low likelihood. Participants who perceived high likelihood of reduced standard of living (26.1%; M = 10.01, SD = 3.99) had higher distress than those with no risk (M = 7.35, SD = 2.96, p < .001) and low likelihood (M = 8.98, SD = 3.54, p = .028). Those experiencing one or more financial insecurities (M = 10.56, SD = 3.85) had significantly higher distress than those who did not (M = 8.77, SD = 3.59, p = < .001). There was no difference in distress for perceived risk of job loss.
Table 1 shows the hierarchical regressions. In model 1, age and self-reported previous mental ill-health was associated with distress. Of the four significant perceived financial impacts in model 2, only reduced standard of living was associated with distress, alongside previous mental ill-health and age. When experienced financial impact was added in model 3, there was no association with distress, and the results did not change.
Hierarchical regression models evalauting association of demographics, perceived financial impacts, actual financial impact with distress.
Discussion
This study compared the impact of perceived and actual financial insecurities on the psychological distress of mainly white-collared working Australians during the first wave of the pandemic. The period of data collection, COVID-19 restrictions, was a time of financial stress, alike the current period of rising cost-of-living. Participants who perceived a high likelihood of having to access their savings or loans, welfare payments, superannuation, or reduce their standard of living over the course of the pandemic had higher distress, as did those already experiencing financial strain. However, only perceived high likelihood of reduced standard of living, not experienced financial insecurity, was associated with psychological distress, when controlling for demographics.
Our results suggest that, at the core, it is the perceived reduction of standard of living, rather than actual or perceived financial insecurity, that is associated with increases in psychological distress. While previous studies have suggested that financial worries and upsetting emotional responses to financial stress increase distress (Asebedo and Wilmarth, 2017; Ryu and Fan 2023), our findings add that the main concern underlying subjective financial strain and distress is the fear of reduction in standard of living.
This has important ramifications for the Australian population considering the financial climate. The RBA (2023) indicated the interest rate, and consumer price index will take years to fall to pre-pandemic levels, suggesting this level of financial pressure will continue to increase distress among many Australians, even those who are relatively financially stable. This is compounded by the cessation of the Better Access scheme, which eased financial burden of mental healthcare during the pandemic (Pirkis et al., 2022). Our findings suggests that Australians who perceive to be hit with the cost-of-living crisis will experience poorer mental health, yet under the current Medicare scheme, many will also not be able to afford mental health support.
Furthermore, the rising cost of living and inflation is receiving extensive coverage by mainstream Australian media outlets. Media reports on Reserve Bank announcements, financial forecasts, tracking the cost of goods and personal stories of financial hardship are increasingly common, meaning this issue is at the forefront of Australian’s concerns. This high level of coverage is driving concern and fear around cost of living, contributing to higher distress.
Limitations to this study included being mainly represented by well-educated, white-collared workers in an insurance cohort, which limits generalisation to all working Australians. Our measure of financial impact was unvalidated and the dichotomization into high and low risk was arbitrary. Also, there was only one question on experienced impact which may have missed nuances in type of experienced insecurity. Finally, it was not possible to assess longer-term impacts of financial stress given the cross-sectional design.
Conclusion
We found that perceived high likelihood of reduced standard of living was the single significant financial predictor of increased psychological distress. This suggests that the fear of future problems seems more distressing than the actual problem, an anticipatory effect. As such politicians could do well to try and provide some guidance of future impacts on the communication of interest rate increases and policies addressing cost-of-living concerns. Media stories could focus less on the hype of predictions of future interest rate hikes and more on policies that support households to manage their standard of living.
Footnotes
Acknowledgements
The authors would like to acknowledge TAL Life Limited for supporting data collection.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The author(s) disclosed receipt of the following financial support for the research, authorship and/or publication of this article: I.C. and N.G. were supported (partially or fully) by the Australian government through the Australian Research Council Centre of Excellence for Children and Families Over the Life Course (Project ID. CE200100025).
