Conflicting economic policies and mental health: evidence from the UK national living wage and benefits freeze

Lateef Akanni, Otto Lenhart () and Alec Morton
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Otto Lenhart: Department of Economics, University of Strathclyde
Alec Morton: University of Strathclyde

No 22-10, Working Papers from University of Strathclyde Business School, Department of Economics

Abstract: This study evaluates the mental health effects of two simultaneously implemented but conflicting policies in the UK: the National Living Wage and the benefits freeze policy. We employed the Callaway and Sant’Anna (2021) DID estimator to evaluate the heterogeneous policy effects, and we found that NLW leads to positive improvements in mental health. Also, we find that the negative impact of the benefits freeze policy constricts the NLW effects. Our result is robust to the sensitivity analysis of the parallel trend assumption. Additional results support the psychosocial hypothesis that increased job satisfaction is strongly correlated with improvements in mental health. Also, we found evidence of substitution effects between work hours and leisure. Overall, our findings suggest that the effects of the NLW cannot be understood in isolation from how the entire suite of policy instruments operates on earnings and liveable income for affected low-wage workers.

Keywords: National living wage; Benefits freeze; Mental health; Income policy; Difference in Differences; Treatment effect heterogeneity (search for similar items in EconPapers)
JEL-codes: C14 C21 C23 I18 J38 (search for similar items in EconPapers)
Pages: pages
New Economics Papers: this item is included in nep-lma
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