Financial Hardship and Mental Health during the COVID-19 Pandemic

Background and Purpose: The COVID-19 pandemic has surged financial hardship as a result of stay-home orders, layoffs and furloughs, and a disrupted economy. Abrupt changes by the recent pandemic have left many households struggling in meeting basic needs, such as food and housing. These challenges exacerbate stress and mental health. This study aimed to identify the patterns of financial hardship and its relationship with mental health during the recent pandemic.

Methods: This study used data from the cross-sectional Household Pulse Survey Phase 3 conducted on February 3-15, 2021. The U.S. Census Bureau partnered with agencies from the Federal Statistical System and recruited a national sample using a systematic sampling method. The dependent variable was depressive and anxiety symptoms in the last 7 days, measured by the four-item Patient Health Questionnaire (PHQ-4). It ranged from 4 to 16. Higher scores represented more severe levels of anxiety and depression symptoms. The independent variable was financial hardship patterns. We used six indicators to identify them: (1) recent household job loss (2) expected household job loss (3) food insufficiency (4) difficulty in paying rent or mortgage (5) confidence in ability to pay mortgage or rent next month (6) expected eviction. We limited our sample to those with low- and moderate-income (total household income less than $50,000 in 2019). Our final sample included 17,518 participants. We conducted Latent Class Analysis (LCA) with a distal outcome. First, we identified the patterns of financial hardship. Next, we tested the association between financial hardship patterns and mental health symptoms using the Bolck, Croons, and Hagenaars (BCH) Method, controlling for sociodemographic characteristics (e.g., age, gender, race/ethnicity, education, household income, marital status, household size). Analyses employed a sampling weight to account for nonresponse bias.

Results: The LCA analysis identified three groups of financial hardship: Low unemployment and modest hardship (Class 1), high unemployment and modest hardship (Class 2), and high unemployment and extreme hardship (Class 3). Class 1 (56%) reported relatively low probabilities in most indicators, depicting low risk of unemployment and modest hardship. Class 2 (7%) was characterized with very high risks in all indicators, that is, high unemployment rates and extreme hardship. Class 3 (38%) had high risks of unemployment but modest hardship, which reported high probabilities specific to job loss, either recently experienced or expected. The final analysis presented that Class 2 with high unemployment and modest hardship (b=3.43, p< .001) and Class 3 with high unemployment and extreme hardship (b=1.18, p< .001) showed significantly higher levels of anxiety and depression symptoms, compared to Class 1 with low unemployment and modest hardship.

Conclusions and Implications: This study provides important empirical evidence that characterizes financial hardship patterns during the COVID-19 pandemic and confirms a close relationship between financial hardship and mental health. Financial capability strategies should address the needs of populations with financial hardship risks to mitigate the long-lasting effects of the pandemic.