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How to Improve Mental Health in America: Raise the Minimum Wage

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Mental illnesses are one of the great plagues of mankind. They are the largest cause of disability in the world and responsible for countless suicides. In the U.S., there is bipartisan recognition that, in Senator Chris Murphy’s words, “Mental health care in America is in desperate need of an overhaul.” But even reform efforts with widespread support face the usual obstacles: What’s the most effective path, and who should pay for it?

A new study suggests a simpler, less costly approach to improving mental health on a massive scale: raise the minimum wage.

In 1998, Britain passed the National Minimum Wage Act, which created a minimum wage of £3.60 ($7.35 in current U.S. dollars) and resulted in about a 30 percent raise for the typical worker below that threshold. That law, British economist Aaron Reeves and his colleagues report in Health Economics, substantially improved the mental health of low-wage earners “by reducing financial strain in low-wage workers.”

There is a frequent policy debate about whether it is better to improve the health of the poor by providing them with better access to treatment or by giving them more money. Everyone deserves access to a decent minimum of care, of course. But being at the bottom of the economic ladder is a big mental health risk factor, a finding that has been replicated in many studies. Getting a wage increase helps workers cope with life stresses that promote the risk of depression and other mental health disorders.

The British study used data from the British Household Panel Survey, a sample of U.K. families who are interviewed annually about their well-being and livelihoods—including a mental health questionnaire that measured whether they experienced levels of symptoms consistent with having a psychiatric disorder. The researchers compared workers who received higher wages because of the minimum-wage law to two comparison groups. One group included low-wage workers who should have gotten an increase but did not because their employers didn’t comply with the law. The other group included workers who did not get a wage increase because they were paid just above the minimum wage threshold. For each group, the researchers estimated the difference between their mental health before the law came into effect in 1999 and their mental health after.

If getting higher wages is good for you, then the change in the mental health of workers who received higher wages ought to be greater than the change in the two groups of comparison workers who did not. The researchers found that workers who got higher wages because of the minimum wage law also experienced an improvement in their mental health, both in absolute terms and relative to the comparison groups. Importantly, the effect of the wage increase was about as large as taking an anti-depressant medication.

There are reasons to worry about Reeves’s data. The most important concern is that it was not a true experiment, because workers could not be randomly selected to either get a wage increase or not. So it’s possible that the improvement in the mental health of workers who got a raise had some other cause. However, a recent randomized experiment produced similar results. In the Oregon Health Insurance Experiment, uninsured Portland residents were able to enter a lottery, and the winners could apply for insurance through Medicaid. The primary benefits of insurance are financial: Getting Medicaid reduces both the out of pocket cost of health care and the risk of incurring unpayable medical bills. Not surprisingly, recipients who got Medicaid reported reduced financial strain. They also reported improved self-reported mental health and were less likely to be identified as depressed.

It’s always been harder for Americans to get mental health care than physical health care. In most communities there are not enough mental health care providers to meet the demands for services. Many psychiatric medications are expensive. Health insurance often provides inadequate coverage for mental health care. Some of these problems were addressed in the Mental Health Parity and Addiction Equity Act of 2008 and the Affordable Care Act, but significant problems remain.

We need to be realistic about the limits of what we can achieve if we only work on the mental health treatment system. Delivering anti-depressants and psychotherapy to the many people who need them is much harder than it looks. Training and hiring more mental health specialists won’t mean that all the people who need care will get it. Like every other specialized clinician, most mental health providers do not serve the urban or rural poor. Newly minted psychiatrists are far more likely to open practices in Manhattan than in East Baltimore, or in Toronto than in Thunder Bay. Moreover, low-income patients find it difficult to make therapy appointments, fill prescriptions, or consistently take medications. Increasing the resources for mental health care is essential, but it will only dent the problem.

Therefore, we need not just better treatment but also preventive mental health care: public policies that reduce the number of people who become mentally ill. Cholera was defeated in the industrialized world by clean drinking water, not antibiotics. Similarly, we need to develop strategies for attacking the social determinants of mental health problems.

The finding that you can reduce mental health problems by increasing the minimum wage is important because raising the wage is easier than redesigning the mental health treatment system. Getting mental health services into poor communities and getting poor people to access them are largely unsolved problems. How to pass and enforce a minimum wage law is well-understood.

Moreover, increasing the minimum wage provides an immediate preventive benefit to a large number of highly stressed people. See again the British example. The minimum wage applied to only 2 percent of British workers in 1999, but since then the wage has been increased so that it now benefits 5 percent, and under the National Living Wage policy it will benefit more than 10 percent (3.2 million workers) in 2020. In effect, raising the minimum wage may be like putting antidepressants in the water pipes serving millions of low-wage workers.

The debate about increasing the minimum wage usually focuses on the clear economic gains for low-wage workers and the potential costs to business owners. Some policy analysts worry, for example, that it may cause businesses to close or make it harder for the unemployed to find jobs. But if the findings of the British minimum wage study are accurate, and can be applied to the American system, then it provides yet another compelling moral argument for ensuring that everyone earns a living wage.