How Job Loss Impacts Mental Health

There are many sources of stress in our lives, but many of us can agree that work makes it to the top of this list. We spend long days in the office, performing tasks that drain our energy, and we are continuously expected to produce high quality work. However, there is something more stressful than work: not working.

In this 21st century we are continuously striving to increase efficiency and decrease costs. We are seeing many jobs being replaced by machines because it is more efficient and cheaper in the long run. In other workplaces where the work being done cannot be replaced by machinery, companies are downsizing  (i.e., laying off employees) but still expecting the same amount of productivity. Thus, one employee might be doing a job that may have been previously spread out between two employees. The great recession of 2007-2009 saw a great number of workers being laid off. Although the market has rebounded since then, the job crisis is still present.

When reflecting on the effects of job loss on a person’s mental health, there are three parties that need to the considered:

The Laid Off Employees

These are the individuals who are hit the hardest by a layoff. These individuals who have been laid off are prone to experiencing a decrease in overall health (Grunberg, Moore, & Greenberg, 2001; Ramlall, Al-Sabaan, & Magbool, 2014), increased depression (Goldman-Mellor, Saxton, & Catalano, 2010; Grunberg, Moore, & Greenberg, 2001), as well as suicide, alcohol abuse (Goldman-Mellor, Saxton, & Catalano, 2010), and significant changes in eating habits (Grunberg, Moore, & Greenberg, 2001). It has been found that unemployment following a lay off is not only related to distress but it is actually the cause of distress (Paul & Moser, 2009). Employees who have been laid off are the ones who need the most support, financial and otherwise. Unfortunately, this support is currently lacking for most individuals. Support needs to not only be implemented before laying off, but also during the lay off period and after.

The Layoff Survivors

Lay off survivors are fortunate in the sense that they still have a job while being surrounded by job loss of coworkers. However, still having a job while being surrounded with layoffs is not particularly helpful with protecting against distress. Survivors who have had contact or witnessed lay offs experience the same negative psychological effects as the individuals who were actually laid off (Grunberg, Moore, & Greenberg, 2001). Furthermore, they experience increased burnout as their job demands grow as a result of organizational restructuring (Cotter & Nadya, 2013).  Similarly to their laid off coworkers, survivors require ongoing support as their job security is threatened.

The Employer

Understandably, there is not much research exploring the psychological impact of being an employer who has to lay off his/her employees. However, we cannot neglect the impact that being the individual delivering this news can have on one’s mental health. There is no doubt that telling people they have lost their job, one of the most devastating pieces of news that someone can receive, would cause you distress. Employers who have to take on this role cannot simply pass on the message and walk away. They hear about the hardship of job loss from their former employees and feel accountable to provide some sort of support. In addition to this, employers who hire workers who had been previously laid off must also be aware of the distress that these workers bring with them. These new employees arrive with a decreased sense of trust and increased cynicism, which can easily affect their performance at work (Douglas, Skarlicki, & Passell, 2003).

It is important not to neglect any negative psychological feelings that result from losing a job, or witnessing family members/friends losing their job. If you have access to counseling, EAP, or other forms of support it would be essential to make use of them. Job loss is an unfortunate situation, even for the most financially secure individual, because job loss is not only a financial loss, but a loss of a major life role and sense of purpose. Employers who are about to conduct blanket layoffs need to be wary of the consequences, as there is some evidence to suggest that this method of organizational restructuring instills negative attitudes in surviving employees and decreases their productivity (Wang-Bae, 2003). The most helpful thing that employers can do for their ex-employees is to provide support before, during and after layoffs. It has been found that individuals who receive help with lifestyle changes and coping strategies do best with maintaining their financial resources and transitioning out of and into new roles more smoothly (Ramlall, Al-Sabaan, & Magbool, 2014). So, while the financial needs of laid off workers are important, their mental health needs and coping mechanisms should be an equal or greater concern.


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