Effects of financial insecurity on mental health

It is critical to consider how financial strain and dependency on a salary affect mental health. As job salaries are the primary source of income for most Americans, job seekers place a great deal of importance on finding a job that allows them to pay their household bills and any lingering debts (Ackerman et al., Reference Ackerman, Fries and Windle2012). With greater stress-induced debt, the motivation for job selection becomes primarily based on salary rather than pursuing a fulfilling career (Ng & McGinnis Johnson, Reference Ng and McGinnis Johnson2020). The pressure of repaying credit card debt or unpaid bills can make one feel like they are losing control over one’s life, resulting in increased levels of anxiety and stress (Grable & Joo, Reference Grable and Joo2006). Mental well-being and financial insecurity are linked to one another such that loss of control due to debt makes individuals three to four times more likely to suffer from mental or neurotic disorders (Reading & Reynolds, Reference Reading and Reynolds2001; Richardson et al., Reference Richardson, Elliott and Roberts2013; Selenko & Batinic, Reference Selenko and Batinic2011).

Having debt is mentally and economically draining, and it can affect one’s ability to make smart decisions (Ong et al., Reference Ong, Theseira and Ng2019). Stress-induced debt leads to greater emotional decision making than practical decision making (Caplan & Schooler, Reference Caplan and Schooler2007). Rather than managing their debt with effective financial strategies, debtors under stress are more likely to turn to unhealthy behavior that provides them with emotional relief (e.g., smoking and drinking), compromising their physical and mental health (Grafova, Reference Grafova2011). One may also use spending as a coping mechanism to manage their mental health, propelling them further into debt (Rice et al., Reference Rice, Garrison and Liu2020). Furthermore, financial hardship may deter one from seeking treatment due to the high cost of health care, which leaves financially strained individuals unable to access the care that is necessary to treat the symptoms of anxiety, stress, and depression that adversely affect their mental health (Rowan et al., Reference Rowan, McAlpine and Blewett2013). Thus, to better understand employee mental health, we need to look at the root cause of financial stress: income.

Application of self-determination theory to basic income

Due to the negative effects that financial insecurity and debt can have on an individual’s mental health, the importance of an individual’s income cannot be understated. Stress and financial instability can negatively affect an individual’s health and well-being (Weida et al., Reference Weida, Phojanakong, Patel and Chilton2020). A framework for studying the effects of income on mental health is the self-determination theory. SDT posits that an individual reaches the highest level of intrinsic motivation and better well-being when the needs for autonomy, competence, and relatedness are met (Ryan & Deci, Reference Ryan, Deci and Michalos2014). We focus specifically on autonomy and competency because we expect these components to be the most relevant to BI’s influence on employees’ mental health.

Autonomy is the perception of free will in one’s actions (Ng et al., Reference Ng, Ntoumanis, Thøgersen-Ntoumani, Deci, Ryan, Duda and Williams2012). High autonomy can be achieved when one is given the opportunity to set one’s own schedule. Autonomy can be used to explain the beneficial outcomes of BI, such as work-related motivation, commitment, and overall well-being (Rosso et al., Reference Rosso, Dekas and Wrzesniewski2010). By implementing BI, people would have greater flexibility in choosing between education, leisure, employment, community support, and childcare (Reed & Lansley, Reference Reed and Lansley2016). When employees are autonomously able to choose their tasks and jobs, they will see them as more meaningful (McGregor & Little, Reference McGregor and Little1998; Ryff, Reference Ryff1989). Therefore, implementing a BI system may improve the meaning of work and improve the well-being of individuals because they will have more autonomy in selecting their jobs.

Competence is the sense of self-efficacy in one’s actions (Ng et al., Reference Ng, Ntoumanis, Thøgersen-Ntoumani, Deci, Ryan, Duda and Williams2012). To accomplish high competence, employees can choose tasks that match their skill set. If one feels inept, incompetent, and incapable of accomplishing work tasks, the job can feel meaningless (Baumeister, Reference Baumeister1991; Steger et al., Reference Steger, Kashdan, Sullivan and Lorentz2008). With the extra financial security provided by BI, individuals may choose to pursue a career that aligns better with their skill set than to seek positions that offer a higher salary. It is common for employees to bypass positions at which they can excel because the pay is mediocre and not enough to be sustainable. A skilled artist, for example, may not choose this career path considering the uncertainty of its financial future (Collins, Reference Collins2012). Given the connection between BI and SDT, it is understandable why BI pilot projects show that regular access to more financial resources greatly improves mental health (Witte, Reference Witte2019). With the implementation of BI, employees can have more autonomy and competence over their jobs, thereby leading healthier lives. Meaningfulness can be an abstract concept to put into practice; however, by creating policies and practices, such as a BI, the government may be able to better support employees’ mental health and overall well-being.

The benefits of BI go beyond improving people’s mental health; it can also contribute to better organizational outcomes. One outcome of interest for employers is job performance, which are scalable actions, outcomes, and behaviors performed by employees that contribute to the achievement of organizational goals (Viswesvaran & Ones, Reference Viswesvaran and Ones2000). Previous evidence supports the connection between mental well-being and job performance (Cotton & Hart, Reference Cotton and Hart2003). Another outcome of interest that BI can improve is employee motivation, which is the direction, intensity, and persistence of behavior (Kanfer, Reference Kanfer1990). Motivation on the job increases when people perceive more work autonomy (Eitam et al., Reference Eitam, Kennedy and Tory Higgins2013). As supported by SDT, if an employee’s basic needs are being met, they will be more motivated to perform well on the job (Oswald et al., Reference Oswald, Proto and Sgroi2015). In addition, strong work motivation is linked to important work outcomes such as reduced turnover intention (Dysvik & Kuvaas, Reference Dysvik and Kuvaas2010). Considering how costly turnover is to an organization (Waldman et al., Reference Waldman, Kelly, Aurora and Smith2004), any method to keep employees at the organization should be welcomed.