Psychological Threats Associated with Economic Insecurity during COVID-19 Pandemic

1 Indian Institute of Psychology and Research, Bengaluru, Karnataka



Background or Objectives: The Corona Virus Disease – 2019 (COVID-19) is an  unforeseen  pandemic that had spread worldwide since the end of December. Besides the medical emergency and increasing mortality rate associate with the disease, the pandemic also has a profound impact on economic, psychological, and sociological aspects of individual lives. Widespread incidents of unemployment, layoff, financial crisis, job insecurity, and liquidity risks emerged due to lockdown and social distancing practices that have led to economic insecurity among individuals and across organizations. The present paper attempts to analyze the significant psychological and  economic  threats that could result due to this economic insecurity by reviewing previous findings, both related to the COVID-19 pandemic as well as to other similar situations of economic recession in the past. The major mental health consequences identified with economic insecurity are depression and suicidal ideations, along with anxiety, family conflict, and other potential threats. The paper also attempts to identify diverse intervention strategies, both economic and psychological, that could have a profound influence in the process of combating the economic insecurity due to COVID-19 and associated psychological challenges. The results obtained could be used to develop intervention programs for the economic and psychological challenges identified. The conceptual framework presented could also be used as a reference for further empirical analysis.

Keywords: COVID-19, economic insecurity, economic challenges, psychological challenges, mental health, recession


Employment and economic security are among the most crucial determinants of life satisfaction and wellbeing. The impact of the financial crisis on mental health and psychological wellbeing  has been explored in past both in normal situations as well as during times of  economic  recession. Since the end of December 2019, nations across the globe are suffering from the unforeseen pandemic of COVID-19. The Corona Virus Disease – 19 (COVID-19) is caused by  the 2019 novel coronavirus (nCoV). The disease gets transmitted  from one individual  to the  other through respiratory droplets. [1]The COVID-19 is outlined as the third significant economic and social outbreak of the 21st century after the 9/11 and Global Financial Crisis of 2008 in a report published by OECD (2020).[2] Diverse psychosocial issues associated with the COVID–19 pandemic are being explored and studied vigorously in the present scenario  throughout  the  world. The present article provides a brief report on the impact of economic insecurity due to the COVID–19 pandemic on the mental health of individuals around the globe.

Economic insecurity is defined as “the anxiety produced by the possible exposure to adverse economic events and by the anticipation of the difficulty to recover from them”.[3] Economic insecurity and associated uncertainties such as fear of unemployment and financial crisis are identified to be negatively affecting an individual’s subjective well-being.[4] Clark and Georgellis (2013)[5] also proved that economic insecurity can harm subjective well-being as well as mental health. Kopasker, Montagna, and Bender (2018)[6] conducted an extensive study on economic insecurity as a socio-economic determinant of mental health. The researchers used the General Health Questionnaire (GHQ-12) for assessing mental health. Economic insecurity was both measured objectively using the Economic Security Index for Great Britain (ESIGB) and subjectively by analyzing the financial expectations of participants for one year as well as by assessing the extent of their satisfaction with the experienced job security. It was identified in the research that individuals suffer from mental health issues if they experience economic insecurity mainly due to subjective constituents. It was also found that asset poverty which was a part of ESIGB also leads to chronic mental health issues in individuals. Perception of risk at work and other work-related insecurities were also found to be correlating with mental health. The results also reported that work-related and financial insecurities influenced  individuals,  with  a significant impact on males, to reduce their working hours as well to engage in substance abuse. Additionally, it was proved that work-related and financial insecurities affect the mental health




of individuals irrespective of whether they have anticipated worry of future chances for unemployment or not.

The COVID-19 pandemic has led to widespread unemployment, financial hardships, and economic insecurity across the globe. Analysis from various parts of the world indicates that business and the global economy have been affected adversely due to the pandemic and practices like nationwide lockdown and social distancing across the  world.  The resulting job instability  and insecurity regarding income can have a significant influence on individuals’ psychological functioning. Closing of organizations, industries, and the majority of workplaces have led to financial instability, layoff, and temporary redundancy among  employees.  Such  an unprecedented crisis has led to various psychosocial issues and reduced mental health among individuals worldwide.

The International Labour Organization (ILO) [7] has recently published an article providing estimates and analyses of the impact of COVID-19 on the global economy. The article provides a detailed statistical analysis of the effect of COVID-19 on various organizational sectors and how  it has raised problems among the workforce. The article outlines that the lockdown and social distancing policies adopted to tackle the pandemic has led to increased unemployment, reduction in terms of working hours, and loss of revenue in the business sector. The article also provides an analysis of how the pandemic has affected different sectors in detail. The conclusions drawn indicate that though few sectors like education, health and social work sector, public administration and defense as well as utilities are not significantly affected, accommodation and food services, real estate and other business activities, the manufacturing sector as well as wholesale and retail trade are facing a severe economic crisis due to the present scenario. Sectors like agriculture, construction, finance and insurance, mining, and recreational activities are also moderately affected due to the pandemic. People involved in informal  occupations  are  also facing a financial crisis. Apart from that, several individuals who are currently working despite  the lockdown,  especially those from the  health sector, are vulnerable to the disease and thus are  at high risk of getting infected. Countries with less basic amenities like health and hygiene  services and social protection are also at a high risk of economic decline.




The ILO Organization has come up with a solution to overcome the medical,  social,  and  financial issues related to the pandemic which includes a policy framework having four major pillars;

  • Stimulating the economy and employment
  • Supporting enterprises, jobs, and incomes
  • Protecting workers in the workplace
  • Relying on social dialogue for solutions

Various activities have been proposed under each of the pillars to be effectively implemented for tackling the diverse workplace issues related to the pandemic. From a psychological perspective, the social dialogue also focuses on enhancing resilience among employees which is very crucial for perseverance in this period of uncertainty.

Szlezak, Reeves, and Swartz (2020) [8] published an article in the Harvard Business  Review (HBR) outlining the consequences of economic crisis due to the COVID pandemic. The article mentions that liquidity and capital issues cause a crisis on the supply side of the economy. The capital problems from the financial side could lead to a decline in labor as well as productivity. The liquidity and capital risks pose a challenge not only to the financial system but also to the   real economy, thereby leading to significant economic challenges. [8] However the researchers proposed that these challenges could be overcome by those countries where the structural resilience is appropriate and the medical system and policymakers are equipped to combat the threats.

Impact of Economic Insecurity on Psychological Wellbeing during COVID-19 Pandemic

Reviewing the significance of economic insecurity and crisis in the business sector as well as in the ordinary life of individuals, it is necessary to analyze the impact economic insecurity could have on the mental health and psychological wellbeing of individuals. It is inevitable to take care of mental health in this period of a medical emergency and economic recession.

The  American Psychological  Association  (APA)  has  published  an  article by Pappas  (2020) [9]

which  outlines  the  significant  mental  health  consequences  of  the  COVID-19  pandemic.  The




article determines that the mental health issues associated with economic insecurity, financial crisis, and unemployment can be long lasting. The researcher however highlights using findings  of previous research that the consequences may not be equal and it  may severely impact the  lower socio-economic classes more. The article compared the current pandemic scenario with the analysis of mental health data from the national, longitudinal Midlife in the United States (MIDUS) study conducted after the Great Recession (Goldman, Glei, Weinstein, 2018) [10] in which it was identified that individuals from lower SES experienced increased mental health issues and negative affect as well as decreased life satisfaction and psychological well-being.  Such a trend could be observed during the present COVID-19 pandemic as well. The study also indicates that there is an increased probability for suicides among men due to unemployment and anxiety resulting from it. The article was concluded with a remark on the significance of building resilience and eudemonic well-being to overcome economic insecurity.

Holmes et al., (2020) [11] published a paper highlighting the significance of multidisciplinary research priorities for the COVID-19 pandemic, with emphasis on actions and services from the mental health sciences. The paper referred to various studies that have identified the  severe  mental health impacts that can emerge from increasing unemployment, financial insecurity, and resulting poverty. The paper mentions the need for exploring these socioeconomic effects more and for  regulating these effects along with controlling the spread of infection. The researchers  also highlight the necessity to identify potential consequences like anxiety, depression, harming oneself, suicide, and other associated mental health issues that could be manifested in individuals who suffer from economic insecurity as well as those who are susceptible to the infection, especially health care professionals. The researchers suggested the implementation of effective psychological interventions that can improve coping skills and resilience among individuals as well as reduce their stress and anxiety levels.

The World Health Organization (WHO) has proposed several measures that could be used as mental health and psychosocial considerations during the COVID-19 pandemic. It includes  diverse precautions that could be adopted to reduce workplace consequences with  emphasis on  the health sector. Major guidelines include obligations for managers to reduce stress and anxiety among employees and making work more flexible and supportive, focusing on a long-term enhancement of occupational capacity. Furthermore, in the guidelines for general medical and




specialized mental health care settings during the COVID-19 pandemic published by NIMHANS (2020)[12], it was suggested in an article by Jolly and Arasappa that financial pressures such as unemployment and loss of pay among quarantined individuals can be addressed by  communicating with a social worker or relevant government agencies as well as by providing awareness to individuals regarding different programs that are initiated by the government to combat with the pandemic. It is also mentioned in another report that the financial crisis during  the pandemic can also lead to psychological and emotional conflicts within families. [13]

A review of the Joseph Rowntree Foundation’s Anti-Poverty Strategy conceptualized to  overcome mental health crisis due to poverty (Elliot, 2016) [14] outlines that economic insecurity can lead to profound mental health problems. Suicides and prolonged psychological and social issues can increase due to unemployment, along with financial crisis and resulting conflicts. The researchers used a human rights-based approach and perceived mental health  problems  as  a social model of disability. The report refers to Goldie (2015) [15] who proposed  that unemployment can affect family dynamics and functioning and can lead to the development of negative attribution styles among vulnerable individuals. They also outlined that social incoherence can also be a potential determinant of the economic status of the community and can result in debt. The study also suggests that mental health issues emerging from poverty affect individuals from lower-economic strata the most. Anti-poverty measures, peer support, and self- management strategies could be effective interventions along with community development and social movements. The impact of the economic crisis on children in vulnerable families is also a critical threat, which might be manifested in the current situation of the pandemic as well. Such issues can be resolved by adopting appropriate parenting programs. Furthermore, the report also referred to the Mental Health Action Plan (2013-2020) [16] proposed by WHO which indicates the public services that could be adopted to enhance mental health. It includes community-based mental health services, holistic care, human resource development, and handling disparities effectively. Such measures could be effectively implemented during the corona crisis as well.

Ng, Agius, and Zaman (2013) [17] conducted a study to analyze the impact of the global economic crisis on mental health and the intervention strategies that can be adopted. They correlated the effects of the economic crisis with the five principal components of mental health conceptualized by Peter Warr from the University of Sheffield. The first component affective wellbeing was




found to be significantly impaired due to unemployment, financial crisis, and debt, and it  increases the levels of anxiety and depression. The second component competence  was  also found to be decreasing making it difficult for individuals to find jobs in the future. The third component of autonomy will also be reduced, leading to poor self-direction and locus of control. Job insecurity reduces autonomy significantly along with a decrease in levels of aspiration which is the fourth component of the mental health framework. Tolerance levels of individuals will also go down, adversely impacting their coping skills, and the individuals may get vulnerable to alcohol dependence. Suicide rates will increase among unemployed individuals. The fifth component integrated functioning will also be negatively affected and children vulnerable to an economic crisis may develop poor cognitive, social, and emotional abilities. Several strategies were suggested by the researchers to overcome these issues, which include; social protection and labor market programs, national-level activities for suicide prevention,  labor  re-integration,  social support, social inclusion, and regulating unhealthy coping techniques like substance abuse, enable countries to control and reduce the extent of depression, anxiety, suicidality, and other mental health issues associated with economic insecurity. [17]

The Committee on Environment, Public Health and Food Safety (ENVI) of the European Parliament organized a workshop to investigate the impact of mental health in times of economic crisis in 2012.[18] It was found that the economic crisis increases the chances of depression and suicide among individuals. It was estimated that a 1% increase in unemployment leads to a 0.8% increase in suicides. McDaid in his presentation on the association between debt  and mental health crisis referred to a study by Skapinak et al., (2006)[19] in which they  identified  that financial hardships increase the chances for depression by two to four times for 18 months following the crisis. Findings from other studies also indicated that debt is  significantly  correlated with suicidal ideations and increased suicide rates. The presentation also provided suggestions for major intervention strategies that can be adopted to overcome the psychological issues due to debt. Debt advice and counseling services were found to have a profound influence on regulating mental health crisis among those who suffer from unmanageable debt. It was identified that debt increases chances for depression  and anxiety among the general population   by 33% and debt advice and counseling services can overcome the issues by 56% if  provided  face to face and by 47% if given through telephone [20]. Furthermore, in another study on mental health and economic crisis presented in the same workshop by Bertollini (2012),[21] the major




intervention strategies proposed to reduce the impact were diverse employment programs, family support, reducing the availability of alcohol, mental health services, and debt relief support. The same interventions were supported by Mateos (2012) [22] in his presentation along with early diagnosis and treatment of depression and suicide, labor market programs, strategies to overcome unemployment among youth, providing support to children and elderly from vulnerable families, and reorganizing mental health services to increase accessibility to those services as well as to promote early diagnosis and prevention.

A booklet published by the World Health Organization [23] on the impact of the economic crisis   on mental health suggested that labor market policies such as resilience enhancing mental health services as well as strategies that focus on retention of jobs and measures to regain employment, family support strategies, debt relief programs, abstinence from alcohol, and mental health services could be beneficial in overcoming issues related to economic insecurity. In a framework provided in the report, associating economic crisis with mental health, it is conceptualized that economic crisis leads to modifications in the macro-economic environment through job shortage, increased debts, inequality in income as well as mental health risk factors  such  as  unemployment, poverty, family conflicts, and reduced accessibility of public services. All these outcomes can eventually lead to decreased mental health in vulnerable individuals. Substance abuse and suicide rates can also be higher in times of economic crisis. Previous research in situations of economic crisis necessitates the need for precautions and other strategies that should be adopted during the current pandemic scenario to tackle the issues related to mental health.

A Conceptual Framework for the Major Consequences of Economic Insecurity during COVID-19 and potential Intervention Strategies

By integrating the significant conclusions drawn from the studies reviewed, the present paper summarizes the major consequences that could emerge from the economic crisis due to COVID- 19 in the following framework.







Figure 1: Framework of major consequences of economic insecurity


After analysis of the major consequences, the following are the potential intervention techniques identified to be having a significant impact on overcoming the economic and  psychological threats emerging from the COVID-19 pandemic and associated economic crisis.



Strategies to


Labor Market Programs and Labor Reintegration


overcome the identified issues


Employment programs


Debt management plans


Economic packages





Psychological Strategies

Counselling and Mental Health Services

Suicide Prevention and Helplines Rehabilitation for Substance Abuse and

    Ensuring Unavailability  of Drugs                   

Social Support and Social Inclusion



Stress Reduction Programs

Parenting programs for taking care of children

                                                                                      from vulnerable families                                     


Figure 2: Framework of intervention strategies to overcome threats of economic insecurity




Limitations and Future Directions

The present paper is conceptual and the findings are presented based on the review of existing literature. Thus, the conclusions drawn from the study cannot be fully generalized to the entire population. Hence future research can utilize the current study as a framework to empirically  (both qualitatively and quantitatively) study the consequences of COVID-19 pandemic and significant strategies that can be adopted to overcome the threats. Based on the strategies identified, researchers could also focus on developing and implementing diverse interventions to tackle the challenges of the COVID-19 pandemic.



The present review paper addresses the issues of economic insecurity and correlated  psychological challenges that individuals suffer across the world due to  the  COVID-19 pandemic. From the analysis of economic recession that occurred due to COVID-19 as well as studies conducted in similar situations of an economic crisis in the past, the major economic challenges identified include unemployment and loss of income, layoff  and job insecurity,  as  well as debt, liquidity risk, and financial crisis. The significant psychological challenges could be depression, stress and anxiety, suicidality, substance abuse, family conflicts, negative affect, and reduced wellbeing and psychological issues among children from vulnerable families. The major intervention strategies that could be adopted to effectively overcome the above-mentioned challenges include labor market programs and labor integration, employment programs, debt management plans, and economic packages from an economic perspective. To tackle the psychological challenges, measures like counseling and mental health services,  suicide  prevention and helplines, rehabilitation for substance abuse and ensuring unavailability of drugs, social support and social inclusion, stress reduction programs, and parenting programs to take  care of children from vulnerable families.

The COVID-19 pandemic is an unprecedented crisis with sudden  and  unexpected  inception. Thus implementation of effective psychosocial interventions to overcome various issues  associated with it would be challenging. Chapman (2020) [24] mentioned in his article on social protection in the US during the COVID-19 pandemic that social protection measures are significant in this situation to protect individuals and to stabilize the economy. Thus, it is the




need of the hour and highly necessary to adopt various strategies that could be used to tackle the crisis. Or else, the consequences will have a daunting effect that could last for a long period.


  1. Anjorin AA. The coronavirus disease 2019 (COVID-19) pandemic: A review and an update on cases in Africa. Asian Pacific Journal of Tropical Medicine. 2020;13;1-5. 10.4103/1995-7645.281612.
  2. Coronavirus (COVID-19): Joint actions to win the war. 2020.
  3. Bossert W, D’Ambrosio C. Measuring economic insecurity. International Economic Review. 2013;54(3);1017-1030. 1111/iere.12026
  4. Clark A, Georgellis Y, Sanfey P. Scarring: the psychological impact of past unemployment. Economica. 2001;68(270);221-241. 1111/1468-0335.00243
  5. Clark A, Georgellis Y. Back to baseline in Britain: adaptation in the British household panel survey. Economica. 2013;80(319);496-512. 1111/ecca.12007
  6. Kopasker D, Montagna C, Bender K.A. Economic insecurity: A socioeconomic determinant of mental health. SSM – Population Health. 2018;6;184-194.

h ttps://

  1. International Labour Organization. ILO Monitor: COVID – 19 and the world of work: Updated estimates and analysis (2nd ed).
  2. Szlezak PC, Revees M, Swartz P. Understanding the Economic Shock of Coronavirus. Harvard Business Review. Boston, MA: Harvard Business School Publishing.
  3. Pappas S. How will people react to the new financial crisis? American Psychological Association.
  4. Goldman N, Glei DA, Weinstein M. (2018). Declining mental health among Disadvantaged Americans. Proceedings of the National Academy of Sciences of the United States of America. 2018;115(28);7290-7295.
  5. Holmes EA, Connor RCO, Perry VH, Tracey I, Wessely S, Arseneault L, Ballard C, Christensen H, Silver RC, Everall I, Ford T, John A, Kabir T, King K, Madan I, Michie S, Przybylski AK, Shafran R, Sweeney A, Worthman CM, Yardley L, Cowan K,Cope C, Hotopf M, Bullmore E. Multidisciplinary research priorities for the COVID-19  pandemic: a call for action for mental health science. Lancert Psychiatry. 2020.
  6. Jolly AJ, Arasappa R. Mental Health Issues of Home Quarantine. Mental Health in the times of COVID-19 Pandemic Guidance for General Medical and Specialised Mental Health Care Settings, NIMHANS.
  7. Desai G, Chandra PS. Handling Domestic Violence during Pandemics. Mental Health in the times of COVID-19 Pandemic Guidance for General Medical and Specialised Mental Health Care Settings, NIMHANS.
  8. Elliott Poverty and Mental Health: A review to inform the Joseph Rowntree Foundation’s Anti-Poverty Strategy. London: Mental Health Foundation. 2016 Jun.
  9. Goldie ‘No time like the present’. In Crepaz-Keay, D. (ed.) (2015) Mental Health today…And Tomorrow: Exploring current and future trends in mental health. 2015;3–16.




  1. World Health Organization. Mental health and psychosocial considerations during the COVID-19 outbreak.
  2. Ng KH, Agius M, Zaman R. The global economic crisis: effects on mental health and what can be done. Journal of the Royal Society of Medicine. 2013;106(6);211-214. doi: 10.1177/0141076813481770
  3. Mental Health in Times of Economic Crisis. Environment Public Health and Food Safety. Workshop Proceedings of European Parliament Directorate General For Internal Policies Policy Department A: Economic And Scientific Policy. 2012 Jun
  4. Skapinakis P, Weich S, Singleton N, Araya R. Socio-economic position and common mental disorders: Longitudinal study in the general population in the UK. Br J Psychiatry. 2006;189;109-17.
  5. McDaid D. The link between debt and mental health. Mental Health in Times of Economic Crisis: Workshop. Brussels.
  6. Bertollini R. Mental health and the economic crisis: Ways forward. Mental Health in Times of Economic Crisis: Workshop. Brussels. 2012
  7. Mateos JLA. Economic recession, depression and suicide: The need for a European roadmap.
  8. World Health Organization. Impact of economic crises on mental health. Copenhagen, Denmark: WHO Regional Office for Europe.
  9. Chapman T. How the COVID-19 Pandemic Exposes the Frailty of Social Protection in the US. ORF Issue Brief. 2020;352.