When financial stress dominates daily life, thinking about employment becomes a luxury few can afford

Across the UK, tens of thousands of unemployed people are stuck in a cycle where poverty and stress keeps them from work. This isn’t simply about unwillingness or lack of motivation, it’s about survival. Financial hardship drains mental capacity, leaving people on low income with little ability to think about job hunting. 

Behavioural science explains that when people are focused on meeting basic needs like feeding their families or paying rent, long-term goals like employment get pushed aside. Persistent financial stress doesn’t just shift priorities, it takes a toll on mental capacity and emotional wellbeing. A recent Quids in! Cost of Living survey found 40 per cent of low-income respondents felt anxious, sad or depressed due to money worries.

Despite the high proportion of economic inactivity linked to poor mental health, the government’s ‘Get Britain Working’ reforms risk pushing thousands with health conditions into deeper hardship, increasing pressure when basic needs remain unmet.

Five in six low-income households on Universal Credit are going without essentials like food, clothing, or warmth (JRF, 2025). Trapped in a cycle where securing enough support becomes a full-time job, these households face the relentless challenge of managing financial insecurity, meeting basic needs, and navigating a complicated benefits system just to stay afloat.

Debt advice schemes like ‘Breathing Space’ recognise how overwhelming hardship can be, offering people time to stabilise before they can begin to move forward. But that kind of space is missing from much of the wider system.

Scarcity mindset  

Behavioural science offers one explanation for why money worries disrupt efforts to find work. In their book Scarcity, Sendhil Mullainathan and Eldar Shafir describe how persistent financial stress, such as mounting debt, captures attention and narrows what they call “cognitive bandwidth.” When the brain becomes so preoccupied with urgent concerns, like paying rent or affording food, that it loses capacity to focus on anything beyond the immediate crisis.

In this survival mode, longer-term goals like preparing a CV, attending training, or navigating job applications become peripheral, crowded out by the stress of managing basic needs. The constant stress of managing a household budget, dealing with rent arrears, or struggling with loans leaves people with less mental capacity to engage in effective job searching (APPG, 2023). 

Bandwidth tax 

Scarcity doesn’t only affect the present moment, it also disrupts people’s ability to plan for the future. Research into the psychology of poverty shows that when vital resources are limited, people tend to prioritise short-term fixes over long-term thinking (JRF, 2025). 

Mullainathan and Shafir describe this effect as a “bandwidth tax”: the mental burden created by financial stress that reduces people’s capacity to make decisions, solve problems, and recognise opportunities.

Job searching, in contrast, demands sustained attention and forward planning. It requires people to weigh options, prepare documents and anticipate employer expectations. But under financial stress, this kind of methodical approach can become cognitively out of reach. 

As a result, those facing hardship often resort to more haphazard job searches, which evidence suggests can lead to lower job quality and poorer long-term employment outcomes (Gerards & Welters, 2022).  

Claire Daniels, Hub Manager at Community Money Advice, witnesses firsthand the impact of financial stress on people’s ability to enter the job market. She told Quids in!: “Any level of debt causes stress, sleepless nights and often a preoccupation with associated anxiety and fear. This precludes the ability to think about new jobs, find opportunities, and navigate the online applications. Preparing for interviews and being able to come across well in an interview can also then be challenging

“Mental health struggles often run alongside struggling with money and the convergence of the two leave many in a position where they just can’t even think about looking for a job.”

Inadequate support 

While the benefit system is intended to alleviate financial stress, inadequate support and efforts to cut the government’s welfare bill exacerbate the challenges faced by those it aims to help. For instance, the two-child limit has been shown to increase financial strain and negatively impact mental health, pushing parents further from the labour market (Reader et al., 2023). 

Similarly, individuals facing housing benefit shortfalls are significantly less likely to find employment (Oxford City Council, 2015). The All-Party Parliamentary Group (APPG) on Poverty puts it simply: “The inadequate rates of benefits are counterproductive to the Government’s aim of getting more people into work.”

However, the issue of inadequacy is not just about the amount of support. Sumi Rabindrakumar from the Trussell Trust told the Big Issue that for many, “incomes are simply not enough to cover the essentials,” with more than half of those facing deductions unable to afford food due to government repayment schemes. This debt trap makes it even harder for claimants to focus on securing employment. 

While the government has taken some positive steps, such as increasing the Universal Credit standard allowance and lowering debt repayment rates to 15%, these steps have been overshadowed by newly announced welfare reforms that disproportionately affect people with disabilities and long-term health conditions. Even the announcements risk paralysis among the people they aim to cajole towards finding work.

Driven further from work

The reforms, including changes to Personal Independence Payment (PIP) and incapacity benefits, are particularly concerning, with up to 1.2 million disabled people potentially losing vital support (Guardian, 2025). Many of these individuals, who are already at a disadvantage in the job market, are now further pushed into financial hardship. 

According to Will Dunn, in his piece ‘Why Britain Isn’t Working’ for The New Statesman, while a large portion of this group wants to work, their health conditions make it impossible. Moreover, the complexity of the benefits system itself also acts as a barrier, consuming time and energy that could otherwise be spent preparing for work. 

In his interview with Will Dunn, Bill Wells, former deputy at the Department of Business, Innovation & Skills, explained: “It takes months, particularly if you’re applying for health-related benefits… to get on to the benefit. And whilst you’re doing all of that, you’re not looking for work, because your main task is to get the benefit.” Dunn added that for some, securing benefits can itself be a full-time job.

Breathing space 

In the face of these barriers, support agencies can play a vital role in helping people regain the stability needed to re-enter the job market. One practical approach to engaging people in debt solutions is the creation of “breathing space” periods, which temporarily shield individuals from debt enforcement and allow them to focus on rebuilding their lives and start preparing for work.

Claire Daniels highlights the value of the government’s Debt Respite Scheme, which gives individuals a 60-day legal break from most creditor action. “This is hugely beneficial for those who need some time and space to look for work without worrying about creditors chasing them or potential enforcement action or eviction,” she explains.

While Daniels notes concerns about how rarely longer pauses are granted, she believes even a short break can make a difference. “Sixty days isn’t a long time, but it can enable someone to get the headspace they need to look for jobs and prepare for interviews. If successful, that progress can have a positive impact on their financial situation going forward.”

In his latest blog,  Jeff Mitchell, Managing Director at Clean Slate Training & Employment, envisions a “Job Hunting Breathing Space” that would allow jobseekers to stabilise their finances before engaging in employment support.

Image: Thomas Andre Fure / Shutterstock