What are the economic costs of loneliness?

Background

Loneliness and social Isolation have emerged as significant public health issues (Office of Surgeon General, 2023; Card et al., 2022; Holt-Lunstad, 2021). The list of diseases that associated with a lack of social connection include mental health outcomes such as depression, anxiety, and psychosis (Mann et al., 2022) and chronic diseases such as cardiovascular disease, hypertension, chronic kidney disease, diabetes, and cancer (Kanbay et al., 2023). Beyond the significant implications of social disconnection for public health and human welfare, increasing levels of loneliness (Atalay, 2024) have important implications for the economy, which are of concern to governments, businesses, and the public alike. Understanding the economic costs of loneliness and social isolation is therefore an important step to informing potential actions to address these social challenges.

Purpose

The purpose of this evidence brief is to review the interaction between social disconnection and economic factors in order to inform our understanding of the economic impacts that loneliness and social isolation might have.

Evidence from Existing Studies

Based on the available literature, it is clear that the impact of social connection on the economy is both complex and profound, affecting the standard of living for households today and setting the trajectory that will determine the standard of living for subsequent generations. From this perspective, social connection imposes economic costs over two interconnected dimensions: Present Day Economic Output and Future Economic Output. In the present day, social disconnection negatively impacts current economic output by decreasing the size and productivity of the workforce (Bryan et al., 2023). The health and social implications of loneliness divert public funds away from other productive purposes and increase the need for taxation (Meisters et al., 2021). Reducing the prevalence of loneliness today would have immediate impacts on the standard of living of Canadian families. Furthermore, looking to the future, social disconnection impacts the inputs to production in the future, including human capital, technology, and infrastructure. Additionally, loneliness reduces social capital and social cohesion and accelerates the accumulation of public debt. Reducing the prevalence of loneliness today has implications for long-run economic growth, which will determine the standard of living for Canadian families in the coming years.

Speaking to these costs, several studies have attempted to quantify the costs associated with loneliness and/or assess the cost effectiveness of interventions aiming to reduce loneliness (Kung et al., 2021; Mihalopoulos, 2020; Cigna, 2019). These studies find substantial direct and indirect costs to health systems and the private sector (Meisters et al., 2021; Peytrignet et al., 2020). For example, it has been estimated that the U.S. Medicare program spends $6.7 billion USD per year due to loneliness (Flowers et al., 2017). On top of these direct costs, it has been estimated that UK employers pay approximately $4.4 billion CAD per year due to absence from work, lower productivity, and increased turnover (New Economics Foundation, 2017). Of course, in more populous countries, these costs are likely higher. Of course, these estimates vary widely across regions and may be inaccurate due to a narrow focus on specific sub-populations (e.g., only focusing on older adults), the failure to conduct a full accounting of costs across multiple domains (e.g., only focusing on healthcare utilization), or measurement errors in the prevalence of loneliness and social isolation. As such, no widely acceptable or reliable cost estimates or return on investment values have been provided. However, it is clear that loneliness and social isolation do significantly reduce quality of life and health (Majmudar et al., 2022) and these impacts do translate into substantial economic costs (Burlina & Rodriguez-Pose, 2023; Meisters et al., 2021). Estimates are therefore wide ranging, though generally suggest negative economic impacts associated with loneliness and positive economic impacts associated with loneliness interventions. Reasonable estimates of the cost of loneliness seem to place costs between $250 and $2000 per lonely patient per year, with higher costs among those who are the loneliness and most isolated (McDadi & Park, 2017; Mihalopoulos, 2020). As well, interventions appear to have a positive return on investment resulting in savings of 20-30% for every dollar invested. However, some estimates on the social returns are much higher, with values ranging between 17% and 800% (Jones et al., 2020; Willis et al., 2018). Such findings are consistent with other cost-effectiveness studies exploring the value of mental health interventions (Le et al., 2021; Bereza et al., 2009). As such, we can generally conclude that there is likely cost-effectiveness, and possibly cost-savings associated with intervening to address loneliness and social isolation (McDaid & Park, 2021; Shaw et al., 2017; Weiss et al., 2020). Of course, the cost-savings associated with interventions depends on their overall effectiveness (Gilbody et al., 2006).

In addition to the costs of loneliness and estimated cost-savings of addressing it, researchers have also begun to explore the value of social connections to individuals, with studies finding that social connections are highly valued in terms of their impact on life satisfaction (Colombo & Stanca, 2014), particularly in comparison to changes in actual economic indicators such as income (Powdthavee et al., 2008). In other words, there is inherent value association with friendships and social connections and the benefit of these connections far exceed traditional economic indicators.

Core Economic Benefits of Social Connection

Contrasted with the economic costs of loneliness and social isolation, we can identify six core economic benefits to improving social connection:

The first economic benefit would be a reduction in healthcare expenditure and the diversion of public funds away from other purposes such as education and infrastructure spending (Kung et al., 2021). Lonely individuals are more likely to visit doctors, use emergency services, and require hospitalization (Sirois et al., 2021). Loneliness is linked to higher rates of depression, anxiety, and other mental health disorders, leading to increased demand for mental health services. Loneliness is associated with an increased risk of chronic diseases such as heart disease, diabetes, and hypertension, which contribute to long-term healthcare costs and higher social care costs, particularly for the elderly.

The second economic benefit would be an increase in the size of the labour force. Individuals who experience loneliness are more likely to miss days of work or be absent from the workforce due to poor physical and mental health (Morrish et al., 2022). Additionally, due to the increased prevalence of chronic diseases, these individuals are more likely to retire from the workforce at a younger age (Vanajan et al., 2020). These factors reduce the size of the aggregate workforce and increase the dependency ratio – the fraction of the population that is not employed.

The third economic benefit would be increased productivity of individual workers (Ozcelik et al., 2018). Loneliness reduces the motivation for individuals to work productively, increases the prevalence of presenteeism (being at work but not fully functioning), and increases job turnover (Sullivan et a., 2023; Bowers et al., 2022). Loneliness also negatively affects cognitive function and decision-making, impairing job performance (Jormoze et al., 2024; Harrington et al., 2023; Ozcelik et al., 2017). Combined, these factors slow the accumulation of the on-the-job training that makes workers more productive over time.

The fourth economic benefit would be an increase in human capital, which is the collective skills, knowledge, abilities, and health of a population that contribute to economic productivity and long-run economic growth (Burlina et al., 2023). Children whose parents and caregivers experience loneliness have poorer educational outcomes and are less ambitious in their educational goals (Nowland et al., 2021). Young adults who experience loneliness have lower school performance and lower school completion rates (Jefferson et al., 2023). Combined, these lead to a less educated population, which has a direct impact on current and future worker productivity.

The fifth economic benefit would be an increase in social capital and social cohesion (Rodriguez-Pose et al., 2021).Social capital is known to: Increase trade, including the spread of productive ideas that lead to innovation and technology growth (Bayraktar, 2024; Lindon et al., 2011); Reduce income inequality and improve increase economic mobility (Raj et al., 2022); Improve social insurance, where families and communities provide mutual support (Mabaso, 2024); Increase the support for public works that contribute to the greater good and to long-run economic growth (Christoforou, 2022; Langenkamp, 2021); Increase support education and accelerate the accumulation of human capital (Christoforou, 2022; Mishra, 2020); And to reduce the level of corruption and crime, which improves ability of the economy to operate efficiently (Buonanno et al., 2009).

The final economic benefit of reducing the prevalence of loneliness, captured by several of the above, would be an increase in the growth of technology that fuels long run economic growth (Yang et al., 2021). This could be made possible through greater public spending on research and development, as fewer funds would be diverted to healthcare expenditure and there is greater support for this spending. Improvements in education and training, and the general health of the population, will speed the rate of innovation the growth rate of technology. Finally, increasing face-to-face interactions increases innovation and improves the dissemination of new ideas (Burlina et al., 2023; Storper et al., 2004).

Analyses by the Canadian Alliance for Social Connection and Health

Using data from the Canadian Social Connection Survey (n = 2,960) we assessed levels of support for actions by non-profit organizations, governments, and businesses to increase social connections among Canadians. These results showed a generally high level of support, particularly for government spending to promote social connection (See Figure 1). In fact, 64.8% of individuals reported being very or somewhat likely to support government funding for programs that educate Canadians on the importance of human connection.

Discussion

Based on the evidence reviewed above, it is apparent that loneliness and social isolation are not only social issues, but pose significant economic challenges. That said, we acknowledge that precisely measuring the total economic cost of loneliness is complicated (Mihalopoulos et al., 2020). Indeed, as described above, researchers have attempted to measure the direct impact on healthcare costs, which include the cost of trips to the doctor, treatment in hospitals, and the long-term care costs of the chronically ill (Meisters et al., 2021). Others have attempted to measure the costs associated with the reduction in the size of the workforce by estimating the share of workdays lost that can be attributed to loneliness-related illness and disease, including mental health illnesses (Jeffreyet al., 2017). One final approach has been to compare the economic growth rates of countries with a low prevalence of loneliness to those with a high level of loneliness to observe these outcomes in aggregate Gross Domestic Product (GDP) (Burlina et al., 2023). While these studies point to significant costs, it is likely that they fail to capture the full economic impact. For example, while we might be able to approximate the explicit costs of loneliness-related healthcare, we cannot measure the foregone economic benefits of spending those funds elsewhere. We might be able to approximate the costs of missed days of work, but we cannot measure the costs of reduced productivity of those who are at work but not performing to their full potential. We might be able to make cross-country comparisons, but GDP by no means fully captures the difference in quality of life made possible with greater social connectedness. For all these reasons and more, it is critical that we address loneliness and social isolation irrespective of the estimated marginal economic costs associated therewith. That said, further studies on the costs of social disconnection and the cost-effectiveness of interventions addressing disconnection will be helpful and necessary for justifying interventions to address loneliness and isolation.

Conclusion

Based on the available evidence, it is clear that there are considerable economic impacts of loneliness and social disconnection. While further research is needed to quantify these costs and identify the most effective cost-reduction strategies, we recommend that substantial public health investments be made in order to prevent and reduce loneliness and social isolation. This includes interventions to support at-risk individuals as well as population-wide efforts to enhance social connections at a community level.