Inequality, poverty, and health: Comments on the Globe’s coverage

Canada’s Globe and Mail newspaper has been running a series of articles on income inequality. This post presents some comments on the coverage of income inequality and health in Wealth begets health: Why universal medical care only goes so far by André Picard.

I make three points. First, that the article is much more consistent with the literature if one reads “poverty” every time the article uses the word “inequality.” Second, that the fact that income and health are correlated across people or across regions does not tell us that income causes health. And finally, that the research does suggest that decreasing poverty will increase health, but that we should not expect substantial reductions in health care expenditures as a result. I close with some notes on policy implications.

Income inequality vs poverty as a cause of poor health.

The article conflates two issues which are conceptually distinct and have different policy implications: the effect of poverty on health, and the effect of income inequality on health. The evidence suggests that poverty reduces health, but there is little solid evidence, and much skepticism in the literature, over the idea that inequality per se leads to lower health, and even more skepticism over the notion that any effect of inequality on health occurs through “stress.” In a previous, fairly technical, blog post I presented an overview of some of the empirical literature on inequality and health. The very short version is: there is pretty good evidence that an individual’s income causes her health, but this effect is much stronger at low levels of income (as in the figure below). There is no good evidence that, holding an individual’s income constant, increases in income inequality decrease that individual’s health. And finally, a variety of factors, notably education and health in childhood, cause both adult income and adult health.

Correlation, causation, and all that.

Pointing out that correlation does not imply causation is tiresome, but here this issue is important as much of the article consists of listing correlations between income and health and interpreting those correlations as if they are evidence of causation from income to health:

Virtually every measure of population health – from child mortality to rates of cancer, cardiovascular disease and traumatic injury – is worse in poor areas than in wealthier ones.

Canadians with an income of $15,000 or less have three times the risk of developing diabetes than those who earn more than $80,000.

Similarly, the risk of dying of cancer within five years of diagnosis is 47 per cent higher in the low-income group than the high-income one.

People living in poor neighbourhoods have a 37 per cent greater risk of suffering a heart attack than those in wealthier areas. But those in middle-income neighbourhoods have a 21 per cent great risk than residents of the richest areas. Most health problems follow a similar gradient.

Consider that, compared with the highest income group, in the lowest income group the rate of stillbirths is 24 per cent higher, the infant mortality rate is 58 per cent higher and cases of sudden infant death syndrome are 83 per cent higher.

Children born to low-income parents are twice as likely to end up in special education classes and three times as likely to suffer mental health problems than those in the highest income group.

Statistics Canada found, for example, that at age 25, life expectancy varies between the highest and lowest income groups by 7.1 years for men and 4.9 years for women.

Some of the best-known research on inequality was done by Sir Michael Marmot, a professor at University College in London. He tracked civil servants in the U.K. and found that mortality rates correlated perfectly with social status and income – in other words, the lowest paid died much younger.

These correlations don’t tell us anything about the effect of income on health, as we would observe such correlations even if there is no causal effect of income on health.

To see why, suppose that income does not cause health for anyone, but also, along with the literature, that education does health. If we were to arrange people in a line from lowest income to highest income, as we move up the line we will tend to find healthier people, but we’d also find that people farther along in the line tend to have more education. We might find all the correlations listed in the article, including correlations between mother’s income and infant’s health, even though we started by assuming that income does not cause health. In the real world, it is likely that there is some effect of adult income on adult health, but we also know that education and a wide variety of other characteristics affect both health and income. That result prevents us from interpreting the finding that higher income and better health are linked as evidence that income causes health.

Some research attempts to statistically control for as many of these influences as possible, but researchers face an additional difficulty: health causes income. Again suppose for the sake of argument that there is no effect of income on health, but also that healthier people tend to fare better in the labor market. If we look across people or across regions, we’ll again find that people with higher incomes tend to be healthier, but we again started with the assumption that income does not cause health.

Some earlier findings purporting to find evidence of effects of income on health are now thought to reflect either “reverse” causation from health to income, or difficult to measure “third variables” which cause both health and income. In addition to education, another particularly important such variable is childhood health, which has been shown to largely explain the correlation between income and adult health in the work by Michael Marmot cited by Mr. Picard (Case and Paxson 2011).

Much of the literature suggests that changes in income have little effect on health, at least for employed adults. Longitudinal studies tracking people over time show that high health predicts which workers will receive promotions, but getting a promotion does not seem to have any effect on a worker’s health, implying that health causes income but not the other way around. Further, comparing two workers with the same initial health, the worker whose income goes up faster is not less likely to die than than his lower-paid counterpart, and there is little evidence that “stress” due to relatively low income is the primary mechanism through which any effect of adult income on health operates (Gardner and Oswald 2004, Adams, Hurd, McFadden, Merrill, and Ribeiro 2003, Jones and Wildman 2008).

Poverty and health care costs.

Finally, putting aside the complex relationship between income and health, consider the claim that income inequality causes higher health care expenditures,

One study estimates that if those in the bottom 20 per cent of income earned as much as those one step higher on the income ladder, the savings to the health system would be $7.6-billion a year.

The source for this figure appears to be this report from the Ontario Association of Food Banks. The author takes cross-sectional data on health expenditures by income quintile and estimates that these expenditures are $7.6B higher in the lowest quintile than in the second-lowest quintile. But there are two serious problems with the interpretation in the Globe article. First, the article interprets this correlation as entirely causal, and as we have seen, that interpretation is consistent with neither theory nor evidence. Second, making people healthier does not necessarily decrease long-run demand on the health care system—in fact, increasing a person’s health may wind up increasing that person’s demand on the system, as they are more likely to live longer and consume health care resources through old age. This isn’t necessarily the case–possibly policies which decrease poverty would have the net effect of decreasing long-run demand on the health care system–but we’d need much more evidence to draw that conclusion.

The point that better health may have little or a counter-intuitively positive effect on health care spending should not be interpreted as an argument against policies which reduce poverty—we value health in and of itself, not solely or even largely because of its impact on health care spending. But we we ought not offer the enticement of fiscal savings though changes in demand on the publicly-funded health care system as a major reason to enact such anti-poverty measures.

Policy implications.

We have seen that the issues surrounding income, income inequality, and health are tricky and the subject of much ongoing research. If we should not conclude that income inequality per se is the main culprit nor that policies which affect incomes are likely to have large effects on health care expenditures, what policy implications should we draw from this research?

We know that public policies affecting income can improve the long-run health of children. Simply increasing the incomes of families in poverty can improve children’s health, for example, Hoynes, Miller, and Simon (2012) show that increased generosity of the U.S. EITC (essentially a negative income tax) improved infant health outcomes, which are likely to play out as better outcomes in many dimensions over those infants’ entire lives.

More generally, there is evidence that poverty causes low health. There is evidence that childhood deprivation harms children, and also that harm done to children’s well-being continues to affect those children throughout their lives. And there is evidence that sound public policy interventions can be effective in reducing such problems, including well-targeted income redistribution but also, and perhaps more importantly, improved quality and quantity of education.

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  1. Kevin Denny’s avatar

    An excellent summary of some important but subtle issues.


    1. Eric Crampton’s avatar

      Very nice. You didn’t note any of Gottfredson’s work on IQ and health though – is there something she’s gotten wrong that I’d missed?


      1. Chris Auld’s avatar

        Thanks. No problems with Gorrfredson’s stuff as far as I know (I have a paper along those lines myself, Auld and Sidhu 2005), this post just offers a little peek at some of the related literature rather than anything resembling a lit review.


        1. Eric Crampton’s avatar

          Oh! Cool, had missed that. Will get it.


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