How a Living Wage Affects Mental Health and Well-Being

15 September 2026

It is well established that health, a fundamental component of human capital, has a bidirectional relationship with economic performance. On one hand, an impediment to health can negatively affect an individual’s labour market participation and productivity, leading to lower earnings. On the other hand, low earning levels and economic shocks are detrimental to health and overall well-being. This is true for both physical and mental health outcomes, although mental health, a very important component of health, is often ignored in mainstream discussion on health.

Globally, studies have been pointing towards higher levels of inactivity among the population, leading to worsening physical health. A 2026 study covering 53,799 individuals in 92 countries finds a global trend of languishing mental health across many groups, including younger populations. The findings could be reflective of the ever-changing nature of the labour market and rapid advancement of technology, often linked to a reduction in entry-level employment opportunities. A decline in the mental health of people, especially the youth, requires focused attention from policymakers.

Several questions need to be addressed to come up with a solution: what form of action would be the most productive, and where? Will legally mandating Living Wages help in reversing the decline in mental health?

Exploring the link between Living Wages, mental health, and overall well-being

The debate on linkages between money (earnings) and health and well-being is not new. Several scholars have tried to address the question: Can money buy happiness? A 2018 study conducted by researchers from Purdue University finds that there is a level of earnings that makes individuals the happiest, and the amount varies by country. At the lowest margins of socio-economic status, it does matter.

The link between earnings and (mental) health has also been explored. The Marmot Review found that earning living wages reduces health inequalities in the United Kingdom. A 2015 study conducted in the Dominican Republic showed that apparel workers who earned living wages (which were 350% higher than the minimum wage) reported significantly lower levels of depressive symptoms relative to those who received minimum wages, after 15-16 months of intervention. A related 2014 study also found an improvement in subjective social status and self-rated health outcomes of the workers who earned living wages relative to those who earned minimum wages.

While research has been evolving in this area in the last decade, several questions still remain unanswered. For instance, the link between intergenerational mobility, early childhood socioeconomic status, and adulthood earnings is less explored: it is unknown whether adults who grew up poor but now earn a living wage are happier and healthier than those who grew up wealthier but now earn the same living wage, and how this varies by countries, age groups, and gender. WageIndicator Foundation has been supporting researchers to address some of the open questions.

Implementing Living Wages: What can we collectively do next?

The relationship between living wages, mental health, and subjective well-being has been established, yet accepting living wages as a standard of wage-setting benchmarks is still not common practice. The payment of living wages, which is most often higher than minimum wages, is not legally mandated. Thus, the odds of workers receiving a living wage remain low. Earning below the cost of living can perpetuate worse health outcomes and lead to a reduction in well-being.

At a time when global mental health is declining, this poses a concern. This also raises a question: why don’t policymakers actively push for a living wage - is it a lack of access to regularly updated quality data to create benchmarks, or not having the right incentives to operationalise this? Having access to regularly updated data can pose a challenge to employers in establishing the pay structure of workers, or for self-employed people to have a benchmark on what they require to earn. The data access gap can be bridged by collecting and providing data from across the world.

WageIndicator Foundation has been collecting data on Living Wage data since 2014, based on the principles developed by Richard and Martha Anker for the Global Living Wage Coalition, presently covering over 4000 regions in 190 countries. The extensive effort includes desk research, analysis of country-specific datasets, and involves 400 data collectors worldwide, ensuring that the collected data is accurate and of high quality.

Even with the data, incentivising policymakers and employers to adopt living wage standards remains an open challenge. Though research on living wages has been on the rise since 2014, there is a need to translate the research into actionable policy recommendations and for policymakers to use the evidence for formulating policies that can enhance (mental) health and overall wellbeing of the population. Engaging in research and advocacy using research-and data-backed evidence on the effectiveness of paying living wages can hopefully help countries move towards improved earnings for all workers.

If you want to learn about the linkages between mental health and living wages at the global level, and how it affects different groups, engage with our webinar on Living Wages and Mental Health on September 24, 2026 at 3-4 PM CEST.