Debt has negative consequences on people’s health, reveals a study by the Quebec Observatory of Inequalities published Wednesday.
This analytical note — the third in a series on wealth and social inequalities related to health — indicates that high debt is associated with higher blood pressure, obesity, poor mental health and poor general health.
Stress related to debt is identified as the main factor that negatively affects health, even if the person in debt has no problem repaying it.
People who experience repayment difficulties, however, will feel much greater stress, underlines Geoffroy Boucher, economist and co-author of the analysis.
He cites the Quebec Household Debt Survey which specifies that in Quebec, the level of stress caused by debt reaches on average 2.9 on a scale of 1 to 10, where 1 means “no stress” and 10 “extremely high stress.” For people who are struggling to repay their debt, this level rises to 9.8. “It’s a level of stress that is very exacerbated and it has all sorts of consequences,” says Mr. Boucher.
“Debt can be associated with a certain social stigma, where people will try to hide their situation. And by trying to hide their situation, they can reduce their social connections, which can lead to a spiral of difficulties because the lack of social connections can also cause mental health difficulties and exacerbate stress,” explained the researcher.
The study underlines that stress can become “harmful to health when it persists over time or when its intensity is high”. Chronic stress particularly increases the risk of developing cardiovascular diseases, musculoskeletal disorders, mental health disorders, the risk of accidents at work in addition to weakening immune defenses.
Positive debts
Not all types of debt have the same impact on health, says Mr. Boucher. To support his point, he cites the research work of Maude Pugliese, from the National Institute of Scientific Research, which made it possible to identify five debt profiles. They are as follows: people who go into debt to buy a house or a car; debt resulting from student debt; people who go into debt to support their loved ones or provide for the needs of their children; people whose debts arise from job loss or health problems; a combination of factors that will contribute to debt.
“We see that debt difficulties are much higher among the last three categories and the stress linked to debt is much higher among these people,” comments Mr. Boucher.
He says debt is a “double-edged sword.” It can be a lever for socio-economic advancement for a large number of people, but for those who have difficulty repaying the amounts owed, it can become a factor of impoverishment.
The mortgage loan, for example, allows many Quebecers to get rich. Mortgage debt is the type of debt that has contributed the most to the growth in the value of the total debt of Quebec households over the last 20 years. It is responsible for 84% of the increase in family debt, the average value of which increased from $61,000 in 1999 to $113,400 in 2019.
Furthermore, Quebec households display a level of debt below the average for Canadian provinces. Ontario and British Columbia have the highest levels of debt, the study says, partly due to the price of real estate.
Inequalities in access to credit
Around one in five people who apply for credit are refused in Quebec. The proportion is higher among men, Indigenous people, racialized people and people with lower incomes.
“These categories of people, if they obtain credit, it is often on more unfavorable conditions, with much higher interest rates, which can put them in a more precarious situation when there is a change in their personal situation or a change in the economic situation,” says Mr. Boucher
“The financial exclusion that will result from inequalities in access to credit will harm the accumulation of wealth among less fortunate families and will contribute to accentuating wealth inequalities,” he continues.
Borrowing capacity will not reduce stress, he specifies. However, borrowing capacity will make it easier to cope with difficult situations in life, such as job loss, illness or rapidly rising mortgage rates. “It’s really when reimbursement difficulties become apparent that the impact on health will be even more deleterious,” says Mr. Boucher.
Bankruptcy is the last resort for people who are very indebted and it is on the rise in Quebec as elsewhere in Canada. In 2022 in Quebec, 25,433 files were filed with the Office of the Superintendent of Bankruptcy of Canada compared to 23,667 in 2021, which represents an increase of 7.5%.
Mr. Boucher, however, hopes that the authorities concerned will change things, in particular by promoting financial education and consumer protection and by focusing on the financial inclusion of the most vulnerable. Moreover, possible solutions will be discussed during the “Heritage and Health Forum” of the Quebec Observatory of Inequalities, which takes place on Wednesday in Montreal.
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