Study revealed greater deterioration among those who lost their jobs, faced difficulties paying loans and had insufficient savings.
The pandemic impacted the economic fragility of Chilean households through an increase in unemployment and a drop in income, which had effects on people’s mental health. This is demonstrated by the study “Financial distress and psychological well-being during the Covid-19 pandemic”, carried out by researchers from the Millennium Institute for Research on Market Imperfections and Public Policies (MIPP).
Based on a survey of 2,552 people, researchers Patricio Valenzuela, Florencia Florencia Borrescio-Higa, and Federico Droller concluded that financial difficulties lead to a higher prevalence of well-being problems and impaired mental health, as well as complications to fall asleep.
Valenzuela, co-author and academic at the Universidad de Los Andes, points out that of those surveyed, 21% lost their jobs, a figure that is higher for the youngest, women and lower-income sectors.
Among the results of the study, it is indicated that unemployment increases the probability of having problems paying a mortgage loan or a consumer loan by up to 24 percentage points and by five percentage points the probability of having insufficient savings to pay for basic needs for at least one year. least three months.
‘We see evidence that these financial difficulties negatively affected different mental health metrics. Obviously, if you can’t pay your bills, you can’t sleep at night,’ he explains.
Those who suffered financial straits or did not have sufficient savings were more likely to experience declines in their well-being and mental health, according to the study.
This decline increased 14 percentage points among those who had difficulty paying a mortgage loan or consumer debt; about 12 points among those who lacked savings; and eight points among those who had problems paying for an additional basic good or service.
Valenzuela also points out that a new relationship of mental health deterioration can occur in this new economic context of high inflation and a drop in economic activity.
“There is a situation where labor income is affected and expenses have increased. Undoubtedly, this generates financial fragility in the sense that people see greater problems in meeting their financial obligations and next year we may have an increase in the deterioration of mental health associated with these problems ”, he explains.
The academic from the Faculty of Economics and Business of the University of Chile, Jaime Ruiz-Tagle, agrees with this diagnosis and points out that “we have an extremely complicated situation” under a scenario of high inflation, since there are debts -for example, mortgage loans- that are readjusted since they are in UF, but the income continues in pesos”.
“It’s a stressful situation,” he says. And although he points out that it is not a possibility of losing a job, as it happened during the pandemic, it is a growing picture and “that part is very concerning. Every month we are experiencing additional stress in the way in which we can cover our financial obligations”, he underlines.
For this reason, both Valenzuela and Ruiz-Tagle point out that it is key to expand mental health coverage and make progress in prevention through financial education, with an emphasis on the concept of savings.
“Savings, even if they are in small amounts, but in a systematic way, allow us to solve problems and prepare for more stressful situations that could occur in the future,” says Jaime Ruiz-Tagle.
MIPP Chile 2024