The Economics of Depression

When people see depression and economics in the same sentence, they assume that the writer is talking about a severe, costly economic downturn, much like the one in the 1930s. Well, the economy is isn’t in a depression–it is suffering from depression. The evidence is right in front of our eyes, and costs us untold billions. 

Clinical depression is one of the most common afflictions among college students and people of working age, and has made its far share of headlines here at Harvard.  About one in 10 adults at any given time exhibits symptoms of major depressive disorder, which include lack of motivation, suicidal thinking, decreased concentration, and persistent feelings of sadness and low self-esteem.

Students with depression are twice as likely to drop out of college as their healthy peers, and have GPAs that are up to 50 percent. These drops in learning and educational attainment can start as early as middle school. The emotional toll this exacts from families and peers is devastating. 

Despite its status as a leader in health-care delivery, America is plagued with a depression epidemic, and has not treated it very well. An estimated $44 billion dollars is lost in workplace productivity each year to depression. That’s the equivalent of 27 sick days for each depressed worker. If the worker arrives at the office every day, the employer loses about 10 percent of productivity. That accounts to a loss of about 5.6 hours every week for each depressed worker, around one-eighth of the workweek. 

And that's only on the job.  When you account for the other costs of depression (medical, family etc.), the cost doubles to over $85 billion per annum, more than the yearly cost of the war in Afghanistan. An individual who suffers from depression can expect on average to make 20 percent less in wages during his lifetime than if he were not depressed. Eighty-five billion dollars is enough to create 1.7 million jobs that pay over median income.  

Between 2000 and 2012, the economy grew by over $2 trillion according to real GDP numbers (corrected for inflation). Depression has wiped out almost half of that.  For a country struggling so much to get back on its feet, depression is shooting us in the foot over the short term by effecting productivity, aggregate demand and many other factors that could improve current recessionary conditions.  

In addition, the losses in human capital should not be ignored, as they could have profound effects later on.  A recent study from the University of Chicago reported that, “The availability of skilled labor is potentially much more important for development than [previous studies] have so far suggested." To be effective and make money in the modern economy, the importance of technological knowledge (coding, statistics etc.) is paramount.  If students are dealing with depression and not achieving their academic potential, long run growth of the economy could suffer due to a less skilled workforce.

Depression, conceivably, could benefit the economy. When people pay to treat depression with medications and therapies, they buy that service from companies and people. Theoretically, this might recycle that money back into the economy via wages and consumption. Unfortunately, little of that money is actually put back into the economy. So where is it going?

Treating depression is costly. One study estimates that Americans spend $11.3 billion a year on anti-depressants, more than it cost to put on the London Olympics. And the firms, like Pfizer and Eli Lilly, which make these drugs are all publicly-traded. Much of the profit made from sales of these medications goes to stock holders in dividends, and not back into the economy as spending. (For reference, over 80 percent of the stock market is owned by the top 10 percent-richest Americans.)  

Depression has tangible effects on the nation’s economy and our shared prosperity. Is there a simple answer to the country’s malaise? Of course not. But we need to talk about it. And Americans need to talk to someone. 

Eric J. Hollenberg ’17 lives in Adams House. His column will appear every two weeks this summer.