Team to Study Income Volatility and Uncertainty on Mental Health and Wellbeing

Could income instability increase the rate of aging and be detrimental to physical and psychological health among the poor?

This is a question that a research team led by Assistant Professor of Health Policy Heather Schofield, PhD, will be examining, thanks to an R01 from the National Institute on Aging. The team was awarded $2.5 million for a four-year randomized controlled trial to study the consequences of income volatility and uncertainty on mental health, wellbeing, and biomarkers of stress.

One of the difficulties people experiencing poverty have is not just a low income, but how unpredictable and unstable their earnings are. While there has been previous research looking at how levels of income and health are related, there is little evidence on the impact of income stability on health and aging.

“When we talk about the lives of the poor, we typically focus on the fact they have very little money while ignoring the potentially large costs of the volatility and uncertainty of their cash flows, which may cause stress, worry, and anxiety,” Dr. Schofield said. “I’m thrilled to be able to begin this exciting work to capture the causal effects of volatility and uncertainty in order to begin to shed light on potential policy solutions.”

With this grant, the research team will conduct an experiment among low-income farmers, where they will create a cash-for-work program. The four arms will be:

• A group of participants that has a fixed, predictable work schedule with the same hours and earnings each period
• A group that has a schedule that varies but the participants are told about the fluctuations ahead of time
• A group that has unpredictable hours and earnings
• A control group that will be surveyed but not offered additional work

“Importantly, we will vary income instability while holding the average level of income constant in order to disentangle the impact of instability from the level-effect,” the aims stated. “The study will create 1,867 new jobs that would not otherwise be available during the lean season when jobs are scarce. The intervention has been designed so that the job opportunity cannot make them worse off than they would otherwise have been in the absence of research (Largent et al. 2019).”

According to the proposal, the team’s aims are:

• “Identify the causal effect of income instability on psychological health (e.g. depression, anxiety), biomarkers of stress (e.g. cortisol), and physical health (e.g. blood pressure).
• Decompose the effects identified in aim 1 into the effects of predictable and unpredictable income instability and compare them to the impact of increasing the average level of income.
• Investigate the channels through which effects on health occur, including both economic and behavioral channels and estimate the impact of key moderating factors (e.g. age, gender, baseline mental health).”

This will be a first-of-its kind study looking at the causal effects of income instability on the mental health of the poor, and the researchers expect this study to have important policy implications.

“The policy debate on poverty has focused almost exclusively on increasing the average level of incomes. We will provide evidence as to whether stabilizing this level may be an important policy goal in itself, potentially providing the same welfare gains at a lower cost,” they wrote. “Finally, as zero-hours contracts and the gig-economy are on the rise in higher-income countries like the United States, our research becomes increasingly relevant, spurring further work in other contexts once basic facts are known.”

Dr. Schofield, a CHIBE-affiliated faculty member, is the principal investigator. The seven other team members are: Drs. Leandro Carvalho, Vincent Somville, Crick Lund, Emily Largent, Eileen Crimmins, and Lila Rabinovich.