Income inequality and health

The ongoing Occupy… protests around the world have brought more attention to the debate on income inequality in the world. Wage variance has increased in the last thirty years, most notably in the United States. In the UK, for example, the top decile of earners took home 31% of all income compared to 28% ten years prior. From some perspectives inequality is not a wholly bad thing. Economist Gary Becker, for example, writes that inequality reflects increased returns on human capital. Richard Epstein argues that the social benefit of, for example having the iPhone, far outweighs the negative aspect of a massive accumulation of capital to Steve Jobs. However, while it may have its good side, income inequality and broader changes to the macroeconomy may also have negative ones. As health economists it should be of interest as to whether and how macroeconomic changes affect health.

A large body of research has analysed the effects of the business cycle on health. Overwhelmingly, and perhaps surprisingly, the evidence appears to show that recessions can be good for your health. In times of economic woe mortality seems to decrease, and physical health increases. Accidents, such as traffic accidents, decrease in times of high unemployment which could be due to reduced commuting. And health promoting behaviours increase during times of recession. However, it is still difficult to account for why cardiovascular mortality may decrease in times of recession along with other causes of death.

When income falls there is both an income and substitution effect. Since health promoting behaviours are time consuming, we would expect an increase in these behaviours as the opportunity cost of time decreases. We would also expect the consumption of tobacco, drugs and alcohol to also decrease. However, the evidence is mixed on both these effects and neither has been demonstrated conclusively.

The aforementioned counter-cyclical trends in health and the business cycle are true of developed countries. However they are not true of middle income and low income countries. Unemployment in these countries is generally associated with poverty. Poverty is almost universally associated with poor health, since people living in poverty don’t have access to health promoting goods and technology. In fact individuals born into poverty are likely to have poor health anyway due to poor nutrition of the mother. However, the link between economic well-being and health is not as clear cut. Many countries, even developed ones, with the same GDP often have very different life expectancies.

One factor that leads to poor health is income inequality. Three reasons for this have been proposed. The first is lack of access to opportunities and resources for the poor. Without income redistribution it is harder to provide pooled resources for universal health care, consider the UK against the US. The second mechanism is through declining social capital. For example, a greater divide in society leads to reduced cohesion and increased conflict, further propagating inequality. The third reason is psychological, the depression, hopelessness and stress that is associated with being poor, particularly in a wealthy society can lead to poor health.

What is clear is that further research is required to understand the macroeconomic determinants of health. It may be interesting in the future to examine to what extent this recession has impacted on public health. Credit facilities are much harder to access now, which could affect health promoting behaviours, more so than in other recessions. I would certainly advocate policies that reduce inequality but this needs to be balanced with policies that promote business growth and development, education and technology that may lead to inequality in the first place but also provide a great social benefit.

2 thoughts on “Income inequality and health

  1. @davidjbuck Thanks for the link, this is definitely something I would like to look into more, the research seems varied and interesting. I think it is something that is far from understood. It would be really interesting to see what health effect the pursuit of free market policies, such as by the current government, would have. I would imagine that many of their current policies would lead to greater wage variance while not smoothing the business cycle, although the research suggests the health effects of this are ambiguous.

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