Nikki Bond, Senior Research Officer, Money and Mental Health Policy Institute

When the disability pay gap and the cost of living crisis collide

29 April 2022

Earlier this week, the Office for National Statistics released two new batches of data, specifically around the disability pay gap and the impact on individuals of the rising cost of living. Taken in isolation, each makes for a worrying read. Together, they shine a new light on the potential scale of harm that people with disabilities, including those with mental health problems, may face in the coming months. 

The disability pay gap

While progress has been made over the last decade in supporting more people with disabilities into work, the gap in typical pay between disabled and non-disabled employees has increased. Overall, disabled employees typically earn 13.8% less than non-disabled employees, equating to £1.93 less per hour. That difference varies across disabilities, with some facing larger gaps. Employees with mental illness as their main disorder experience a 22.1% pay gap – equating to earning more than a fifth less than people without disabilities.  

The disability pay gap is persistent. Beyond supporting people with disabilities into employment, there has been little concerted effort to address lower earnings or support in-work progression for people with mental health problems. Persistently low pay has a huge impact on the security and stability you feel in the rest of your life. 

Lower average incomes mean that people with mental health problems are more likely to rent their homes, and be subject to the instability that this can bring. They’re also less likely to have savings to fall back on to see them through hard times. A quarter of people with mental health problems report that they do not have any money in savings to use for an unexpected expense, compared to 18% of people without a mental health problem. This financial precarity is why people with mental health problems are likely to be among the hardest hit by the ongoing cost of living crisis. 

The impact of the rising cost of living

With increasing food prices, hikes to the price of fuel and energy bills doubling, it’s no surprise that the rising cost of living impacted nine in ten of us in March 2022. However, some people are struggling to adjust to these increases more than others. 

Nearly a quarter (23%) of adults reported that it was difficult to pay their usual household bills in the last month, compared with just around one in six reporting difficulties in November last year. The bills people are struggling with are the essentials – heating and housing. Four in ten (43%) people reported it was difficult to afford their energy bills, and three in ten (30%) said it was difficult to afford their housing payments. 

For some, cutting back on luxuries will help them make ends meet. For others, there is no such buffer. Lots of people with mental health problems can’t cut down on takeaways or use lower cost supermarkets because these were luxuries they never enjoyed, or fell by the wayside a long time ago. Difficulties paying essential bills has consequences. You can either make the payment and cut back on essentials like food, or miss the payment and collections activity starts, even though you simply have no means of paying.

“The shortfall will need to be that we buy less food and pay for less gas / electricity – we have prepayment meters. Because the bills need to be paid as a priority.” Expert by experience

Double whammy

For people with mental health problems, these cost of living challenges follow years of cuts to benefits, a persistent disability pay gap, and less savings and higher debts. People with mental health problems simply do not have the financial buffer to see them through this crisis.   

“I have eaten into my savings and have adjusted my spend. It’s painful to watch savings disappear… But I have no emergency funds left for future problems.” Expert by experience

“There are times I’ve had to go without food to make sure we have heating or electricity.” Expert by experience

These findings, although alarming, are not new. We’ve long known that the most vulnerable are in a more precarious position and likely to be harder hit. But there are steps the government can take to support people, including those with mental health problems, through the cost of living crisis. 

  • As a priority, the Treasury should direct additional funds intended to support low income households with the cost of living crisis through the benefits system, by uprating benefit levels more quickly to better match the pace of inflation.
  • If the government is unwilling to target support through the benefits system, and intends on distributing additional support through local authority-administered schemes, as is the case with the Household Support Fund (HSP), government should review how local councils administered the HSP and how well it reached those most in need.
  • As a longer-term goal, DWP should pilot a targeted programme of in-work progression for people with disabilities, in efforts to narrow the disability pay gap.  

People who are severely unwell with mental health problems cannot simply work their way out of this crisis, nor can they wait for long term changes from employers to support them in work. They need support and they need it now.