Daniel Kopasker - The effects of taxation and social security policies on psychological distress: a microsimulation study of UK policy responses to COVID-19

  • Presenting author: Daniel Kopasker (University of Glasgow)

  • Authors: Patryk Bronka, Rachel M. Thomson, Vladimir Khodygo, Theocharis Kromydas, Petra Meier, Alison Heppenstall, Clare Bambra, Nik Lomax, Peter Craig, Matteo Richiardi, Srinivasa Vittal Katikireddi

  • Session: A02C - Health [1] - Monday 16:30-18:00 Senate Hall

Background

The economic determinants of health are thought to be important in shaping population health and health inequalities. This study develops a microsimulation model to assess the potential for taxation and social security policies to influence population mental health. The COVID-19 pandemic period from 2020 provides an informative context as it involves a substantial economic shock accompanied by novel policy changes in the UK, including the Coronavirus Job Retention Scheme. Projections of psychological distress from the observed policy response are contrasted against a counterfactual scenario with pre-pandemic policies remaining in place.

Methods

A dynamic, stochastic, discrete-time microsimulation model (SimPaths) projects changes in psychological distress given predicted economic outcomes at the household and individual levels from a static tax-benefit microsimulation model (UKMOD) using different policy scenarios. The 12-item General Health Questionnaire (GHQ-12) is used to measure levels of psychological distress (0-36 scale) and potential cases of common mental disorders (CMDs). Both the observed and counterfactual policy scenarios were run 1,000 times to form uncertainty intervals for outcomes in the working-age population (age 25-64) from 2017 to 2025. Model validation was conducted by comparing predicted and observed outcomes from 2011 to 2017.

Results

The UK Government’s response prevented a substantial fall (over 15%) in the employment rate in 2020 and 2021. In 2020, psychological distress increased substantially (>10% in CMDs) under both policy scenarios. Through economic pathways, the policy response restricted increases in the prevalence of CMDs by 5.2% [95%UI 4.3%, 4.7%], approximately 1.8 million cases, with similar results for the median level of psychological distress. Beyond 2021, as employment levels rapidly recovered, psychological distress returned to the pre-pandemic trend. Poverty effects were sustained, with prevalence 2.2% [95%UI 1.4%, 2.8%] lower in 2025 than projected in the absence of the observed policy response.

Conclusions

Policies protecting employment during an economic crisis are effective in preventing short-term mental health losses and have lasting effects on poverty levels. The preventative effect has substantial economic value.