Blog: Stressed out - the cost of shifting risk from institutions to individuals

by Shelagh Young, DHI Engagement Lead

Do you do a good day’s work after a poor night’s sleep? Do financial worries stop you focusing on the other things that matter in life - on family and friends, on your health or your job? 

Stress and anxiety have been the leading causes of lost working days in the UK for some time. But, despite increased productivity being seen as an essential component of economic growth, the impacts of stress and anxiety on the productivity of people who feel well enough to still go to work is comparatively less well measured or understood. 

Last month we reported that more than one in four Scots are losing sleep over their finances. In July the ONS reported the weakest annual growth since the first quarter of 2013 (excluding the Covid-19 pandemic period) and the weakest productivity output of worker per worker since 2009.

Are these two dismal facts related?

We think so. The research charity Centre for Mental Health calculates that mental health related  presenteeism, defined as being present at work but not fully functioning, costs the UK economy at least £21.2 billion a year in lost productivity. 

In the light of this it is obvious that government needs to lead on reducing stress and anxiety in order to boost wellbeing and therefore productivity. It cannot offload all of this responsibility onto employers, especially as not everyone is employed. Employers can rightly be held to account for reducing work-related stress and anxiety but the wider causes are not theirs alone to solve.

One of these sources of stress is the impact of what the Institute and Faculty of Actuaries (IFoA) calls The Great Risk Transfer. This is best described as a shifting of the burden of risk, such as ensuring our workplace pensions yield sufficient returns to keep us out of poverty in retirement,  from institutions to individuals. The IFoA argued that significant changes relating to pensions, work, health and insurance are placing more of the burden of risk on individuals with potentially socially and economically undesirable outcomes. 

We will be exploring our  research on this topic in a forthcoming lecture at the University of Edinburgh Business School. This work, which was supported by the IFoA,  found that the changes the IFoA identified were often poorly understood by the people most affected and not always their top priorities. For example, while the IFoA included precarity at work in its exploration of risk transfers, our research revealed greater front of mind concerns about precarity in housing.

We found that most people had a very partial understanding of the financial risks they were facing but that did not mean they were unaffected by financial risk-related stress. We heard a lot about the stress of coping with financial responsibilities and that was before the cost of living rose so dramatically. This matters because stress is not just a problem of presenteeism or individual unhappiness. Chronic stress causes long-term and profound health problems including weight gain, heart disease and strokes. All of these are a major concerns when it comes to costs to the public purse. 

We will be following up on our work around risk soon to find out more about what could be done to enable people to cope better. But the one thing we know already is that, while actuaries are professionally trained in risk-management, most of the rest of us are not. We need people to stay healthy enough to be at work but we also want their minds on their jobs for the sake of productivity. It is simply not good enough to design and implement policies that overload people with ever greater and more complex responsibilities which mean, as the FT described it earlier this year, we all need to be actuaries now.

ENDS

Click here to book for our upcoming event in partnership with the University of Edinburgh Business School.

Press release: Is trust a must for a brighter economic future?

“Trust plays a crucial role in a successful economy.”  says Charlie Woods, the author of the latest David Hume Institute Discussion Paper launched today ahead of an on-line event on Thursday 23 May at 1.30pm. Is this being overlooked by business and political leaders who are seeking solutions to weaker than desired economic performance?

DHI Director, Susan Murray, will be joined in this webinar conversation from New York by Dr David M. Bersoff, from the Edelman Trust Institute, Charlie Woods, the paper’s author, and leading mediator John Sturrock , who works to build trust in negotiations.

David will share the global context on trust from the 2023 Annual Trust Barometer to help explore the relevance of trust to the economy and the labour market.

At a time when the majority of Scots are concerned about household finances, think Scotland is heading in the wrong direction economically and are pessimistic about our economic future, are we paying sufficient attention to the potential of increasing trust to boost economic performance?

David Hume Institute Director Susan Murray says:

“Research shows a strong relationship between levels of trust in society and economic performance with more trusting societies generating more income per person than others. Thinking differently about what helps boost economic performance might reveal we have been looking for too long in the wrong places to find the Holy Grail of a more productive Scottish workforce.”

The webinar is free to watch here.

ENDS

Notes to Editors

• For media enquiries contact Shelagh Young, David Hume Institute, shelaghyoung@davidhumeinstitute.org

• The Discussion Paper: Is Trust an undervalued ingredient for a thriving economy? Is available here

• The 2023 Annual Trust Barometer can be found here

• The David Hume Institute is an independent think tank based in Scotland. The charity was established in 1985 to increase diversity of thought on the economy and related public policy. Find out more on our website

New Report: Scotland's Productivity Challenge

Scottish productivity has all but stalled in the last fifteen years and a turnaround is required if future living standards are to improve. This report makes recommendations for government, policymakers, business and trade unions, based on the conclusions of new research and case studies. It details five evidence-based stories of what has worked in comparable places and draws lessons from their experiences. In each case a ruthless focus on evidence, building consensus across the political divide, and developing strong and credible institutions were all necessary to turn things around.