Does Pandemic Hardship Harm Health — or Does Poor Health Invite Hardship?
Economic hardship during COVID-19 raised psychological distress directly — but for physical health, the story ran the other way: people already in poor health before the pandemic were most likely to accumulate hardship once it hit. Using four monthly waves of Canadian panel data, this study shows the causal arrow points in different directions depending on which health outcome you measure.
What we studied
When the pandemic triggered a sudden economic contraction in early 2020, millions of Canadians quickly found themselves struggling to cover basic expenses. But two very different stories could explain the link between financial hardship and poor health that researchers observed — and they have completely different policy implications. The first story says hardship causes health to deteriorate: the fear, uncertainty, and material deprivation of financial crisis grind people down psychologically and physically. The second says the arrow points the other way: people who were already in poor health before the crisis were simply less equipped to withstand economic shocks, so they ended up exposed to more hardship.
This study tests both explanations — and introduces a third. "Economic selection" describes a path-dependency process in which pre-pandemic hardship plants people on a disadvantaged track that shapes both their pandemic-era financial exposure and their health, independent of what happens during the crisis itself. Monthly C-QWELS panel data collected from March through June 2020 — beginning just as social distancing began — allowed the authors to track both hardship and health before and during the crisis across 2,456 Canadian workers. Hardship exposure was measured in each of April, May, and June, creating a chronicity index from 0 (no months of hardship) to 3 (all three months).
Two health outcomes were examined separately: psychological distress and self-rated physical health. Keeping them distinct turned out to matter enormously. The study predicted that if social causation drives the results, accumulated hardship should predict worse health even after controlling for health at baseline. If social selection drives them, baseline health should explain away the hardship–health association. The data supported each hypothesis — but for a different outcome.
What we found
For psychological distress, the data supported social causation. Two or three months of hardship still clearly predicted elevated distress even after accounting for distress and self-rated health before the crisis. The hardship itself, not just pre-existing vulnerability, drove the mental health decline. The mechanism is direct. Sustained financial difficulty generates fear, uncertainty, and disrupted routines that translate quickly into anxiety and depression. The psychological costs of economic hardship are rapid and real.
For self-rated physical health, the picture was different. Once health before the crisis was taken into account, none of the hardship measures still predicted physical health. This supports social selection. Those who entered the pandemic already in poor health were more vulnerable to economic hardship, and their worse physical health outcomes reflected that prior vulnerability rather than a direct effect of pandemic-era hardship. Physical health likely responds to economic deprivation over longer time horizons than three months can capture.
The path-dependency finding was striking. People who had struggled economically in the year before the pandemic were more than 30 times more likely to face chronic pandemic hardship. Those already in financial difficulty before the crisis were dramatically more likely to remain mired in hardship once it hit. Equally notable, both psychological distress and poor self-rated health at pandemic onset independently predicted chronic hardship across the following months. Pre-existing health vulnerabilities did not just predict worse health outcomes. They predicted greater financial exposure too.
What this means
The pandemic's economic contraction did not land randomly. Those who were already financially struggling, psychologically distressed, or physically compromised before the crisis began were far more likely to face sustained hardship once it arrived — and for those who did accumulate hardship, the mental health consequences were direct and swift. These findings describe a system of compounding disadvantage, where health and economic vulnerability reinforce each other across a crisis, deepening pre-existing inequalities rather than creating new ones.
Pair income supports with mental health services — fast
This study demonstrates that economic hardship during the early pandemic causally elevated psychological distress — not merely as a consequence of prior vulnerability, but as a direct effect of newly accumulated financial difficulty. Crisis-era policy that focuses on economic relief alone will miss a key harm pathway. Income supports, food security measures, and accessible mental health services need to be deployed together and quickly. The psychological costs of financial hardship emerge within months; the response window is short.
Protect financially vulnerable workers before hardship accumulates
Employees who entered the pandemic already struggling financially — or with pre-existing mental or physical health challenges — were dramatically more likely to face sustained hardship once economic disruption hit. Employers can interrupt this path-dependency by identifying workers at elevated risk early: proactive access to employee assistance programs, financial wellness resources, and flexible arrangements during economic shocks can prevent the compounding spiral of health and financial vulnerability before it entrenches.
Extend follow-up windows to capture physical health effects fully
The absence of a social causation effect for self-rated physical health in this study likely reflects the brevity of the observation window — three months may be too short for economic deprivation to manifest in holistic health ratings. Longer longitudinal follow-ups are needed to determine whether physical health effects emerged as the crisis continued. Future research should also extend beyond employed Canadians to include those who entered the pandemic unemployed or underemployed — the group most severely affected yet least represented in survey samples.