Indebtedness and depression

A couple of days ago when I released a post on a brief perspective on depression, I intentionally left out the details on a link between indebtedness and depression. I just wanted to highlight the possible sources of depression, its symptoms, and ways to overcome it. Considering the strong link between indebtedness and depression, this post is strictly focused on this topic. Do we have any evidence to support our exposition?

Currently available evidence
The evidence currently available is from studies conducted in the United States and Europe, including the United Kingdom, and Spain. The quantitative evidence is from the national or regional household surveys. For example, the survey of 8,500 people, conducted in the mid-nineties by the Institute for Research on Poverty and the Center for Financial Security at the University of Wisconsin-Madison, showed that people with credit card debt and overdue bills were much more likely to experience symptoms of depression than those without such debts. Again, those with student loans and mortgages didn’t experience bouts of depression that frequently compared to those who had too much credit card debt and outstanding unpaid bills. Keep in mind that the sort of depression experienced by these persons is different from the usual concept of ‘clinical depression’ or ‘chronic depression’.

Similar findings were found from data compiled from the three waves (2002-2005-2008) of the Spanish Survey of Household Finances, and presented in the IZA Discussion Paper # 8912, released in March 2015. Among other results based on multivariate models, it found that non-mortgage debt payments and debt arrears affected significantly people’s health. Mortgage debt didn’t affect health that badly as non-secured consumer debt (like amounts outstanding on credit cards, lines of credit, and other debt arrears) did.

Depression/health ailment varies by type of debt
How come mortgage debt and student loan cause lesser health problems or depression compared to other unsecured loans? It’s mostly the attitudinal and mental thinking about debt that makes the difference. For instance, people look at mortgage debt as a vehicle to acquire the biggest asset of their life – owning a home – and its repayment brings them more pride and security as they gradually increase equity in their home. The same with student loans. Persons take such loans to acquire higher education and skills to improve their employment prospects, job mobility, and eventually higher earnings. Its repayment equally doesn’t cause them any mental anguish as they realize that it was something required to improve themselves and their living standards. On the other hand, any debt used to satisfy current consumption, pleasure, travel, or as a bridge to get over spells of inadequate income during unemployment or emergencies could prove to be not only daunting but haunting as well. The payment of this accumulated non-mortgage debt including credit cards, car loans, lines of credit, etc. (excluding student loans) – depending on their respective rates of interest – could cause a serious anxiety and depression for debtors – especially when they have a poor cash flow or have scant or no personal savings. This anxiety and depression eventually affect debtor’s health.

What are some of the ramifications of indebtedness?
Statistics Canada continues to remind us that we carry more debt than we earn – the latest statistics show that we owe $1.68 for each dollar of disposable income (i.e., income after taxes and other deductions including premiums for Canada/Quebec Pension Plan, and Employment Insurance). This is a macro-picture at the national level, based on total household debt outstanding divided by total household disposable income. This ratio doesn’t imply that each and every household in Canada is in debt or owe some money – though a good majority does (according to TransUnion Canada, 26 million Canadians owed at least one type of debt) and most of the debt owed is mortgage debt taken by households to purchase their first home, or to refinance their home to raise funds for any personal reason (like pay-off consumer loans, investing in business, or financing a child’s higher education). With mortgage debt rising (partly as a result of steeply rising prices of homes) way faster than disposable income, some debtors’ are paying huge installments on mortgage debt on the one hand, and using consumer credit to finance their day-to-day needs on the other. These are asset rich but cash poor Canadians, vulnerable to all sorts of anxiety and depression.

Granted, debt finances consumer spending, which in turn, keeps the economy healthy and growing. On the other hand, imagine those financially distressed, anxious, and depressed, running to doctors or hospitals for treatment for all of their ailments arising from monetary distress and its related problems. Highly indebted are more vulnerable to committing suicide, heart attacks, strokes, consume illicit drugs to harm themselves out of sheer guilt, anger, frustration, shame, bad behaviour, keeping themselves away from work – all costing the economy in terms of both low productivity, and rising health care costs. No one knows the cost of treating debtors for ailments and suffering caused by their own actions including spending patterns.

Isn’t this an anomaly? On the one hand, we are offering credit to people, and on the other, we are paying to treat their ailments associated with financial distress brought on by their own actions. The situation is far worse for nearly two million Canadians who use pay-day lending services to finance their needs. This small proportion of Canadians is in too deep a hole to come out of it. But the society remains responsible for their health and well-being.

Need data to analyse the issue
There is an association between indebtedness and anxiety or depression. One wouldn’t know if indebtedness leads to depression or it’s the other way around as some of the depressed people may cure their depression by going on shopping, even on credit. We need some comprehensive data. Statistics Canada periodically conducts Survey of Financial Security in which it collects data on household’s components of assets and debts – besides data on its demographics, income, labour force participation, and coverage under employer pension plan. This will be the ideal vehicle to collect a bit of information on some general health issues experienced by a household (like the principal members feeling anxiety, depression, mental disorder, etc.) The regular National Health Survey conducted by Statistics Canada collects strictly health related data on Canadians. I believe it collects data on a respondent’s total income and labour force participation – but nothing on components of debts. In one survey or the other, we need to collect information on income, expenditure, health, assets, and indebtedness for a more meaningful analysis.


Anxiety   Depression   Indebtedness   Mortgage debt   Non-mortgage debt   Pay-day loan Health   Statistics Canada   Financial Security Survey   National Health Survey

A brief perspective on depression

On Thursday September 1, 2016, the Conference Board of Canada, one of the country’s think-tanks, released a report pointing out that the low productivity of workers with depression and anxiety costs the Canadian economy almost $50 billion a year – $32.5 billion due to depression and $17.3 billion to anxiety. Considering the size of the economy worth around $1.8 trillion, $50 billion may look trivial to some. Nonetheless, depression and anxiety affect workers. According to the report, worker productivity is lost through both absence – when employees don’t show up at work – and presence at work, when employees are not performing to their full potential.

The report shows that the proportion of workers with depression varied by industry group – with the accommodation, food services, and retail trade on top of the list. As I showed in my earlier post on “Our changing economy“, these two industry groups employed 18.2% of the total of 17.9 million employed, and contributed 7.5% to the total of $1.6 trillion of gross domestic product (GDP) in 2015. In other words, workers employed in these industries have lower productivity, and as a result, earn less than those employed in other industry groups. The report acknowledges that jobs in accommodation, food services, and retail trade are precarious – most are non-permanent, offer shift work, and have high turnover. One may easily conclude from this evidence that low earnings are likely the cause of depression and anxiety – besides several others. The report recommends employers to pay more attention to the issue of mental health of workers.

In this note, I don’t intend to question any recommendation of the report but offer a brief perspective on depression alone. Employers may go to any length to care for mental health of their workers, the bottom line, as I see it, is that each worker, being engulfed by his/her own problem triggering depression, is eventually responsible to find a unique cure.

What’s depression?
It’s an illness that impacts the brain of a person. The brain’s chemicals that carry signals among nerves or neurotransmitters are imbalanced and therefore don’t behave as desired, resulting in a brain ailment. The World Health Organization characterizes depression as the most disabling disorders in the world. A depressed person feels totally at loss, loses interest in activities that keep life moving, fails to stay focused, withdraws from people, family, and friends, feels sad and isolated, fails to resolve any personal, family, or work-related problem. A depressed person is on a life’s journey without any navigational compass – floats like a rudderless ship.

Who’s affected by depression and what triggers it?
Depression is a multi-faceted universal concept that can hit men and women of all ages – working, not working, or retired, living in urban or rural areas. Same way, it can hit the poor, the middle class, and the wealthy. The working-poor may be depressed because of inadequate income, the middle class on account of say, too much of mortgage and non-mortgage indebtedness, and the wealthy, on account of, say, investment losses. Depression can be triggered by a number of factors ranging from brain ailment to inadequate income, family conflict, or terminal illness, excessive debt, job loss, lack of career advancement, grief, death of a loved one – to name a few. According to Statistics Canada and Health Canada, depression is likely to affect less than ten percent of Canadians at some point in their lives.

Keep in mind that sadness and depression are two different concepts. Sadness is of short-term nature, and recovery from it may not require any treatment. Depression, on the other hand, is of long-term nature and may require a proper treatment including drugs and antidepressants provided by a doctor or a psychiatrist, or counselling by a social worker. Treatment including use of antidepressants may temporarily improve the chemical composition of one’s brain, and as a result, change one’s mood, but can’t totally eradicate depression unless the remedy to its root cause is found. For example, if one is depressed on account of a family conflict, no medicine is going to cure depression until the conflict is resolved and total harmony prevails among family members. Many depressed persons looking and acting normal on the surface may in fact be resisting voluntarily to share their condition with professional healthcare agents.

Again, depressed men and women act differently. For instance, depressed men may be more irritable, indulge into reckless drinking, angry outbursts, lose interest in work, etc., whereas women may feel sad, guilty, worthless, etc. Both sexes of all ages may socially isolate themselves from family and friends, indulge into binge eating, or sleeping.

How to cure depression?
Depends on how serious the depression is. If it’s chronic, its treatment may require proper medical care, including the use of drugs and antidepressants. On the other hand, if it’s mild or of short-term nature, a person can cure it by changing his/her life style, entertaining more positive thoughts, indulging into activities that he/she likes, keeping his/her heart and mind open to new and challenging thoughts, focusing more on his/her personal goals worth pursuing and achieving, getting away from self-loathing, or self-pity. One of the best cures for both the chronic and non-chronic depression is to develop a routine to indulge into some physical and strenuous exercise. Since all such exercises not only improve the flow of blood in a body, but also cause healthy hormonal changes which, in turn, can help balance the desired chemical composition of the brain – the epicentre of depression. One should stay active as much as one can. Indulge into creative and productive work, activities, or hobbies.

Personally, I get quite depressed if I don’t spend time reading and thinking of some creative ideas for my daily writing, or I miss my trip to a gym for exercise. Reading and writing have been, and still are, are my constant companions and keep nurturing my body and soul. Even when I am depressed for any reason, these activities have always lifted up my spirits. Granted, not everyone is, or can be a keen reader or a writer. The point here is to get involved in activities that give you the utmost pleasure in order to overcome your depression.

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