How does unemployment affect mental health?

Mental health may have spent many years shrouded in mystery and stigma, but in recent years, it has been brought to the front of the world’s mind and rightly so. In Australia, we mark Mental HealthWeek between 9 and 16 October 2021.

Mental health has been a big topic for many years. But now COVID has exacerbated the issue, due to enforced isolation and ensuing loneliness. This Mental Health Week, we’re taking a look at how our mental health can be impacted by unemployment.

It’s no secret that the jobs we have, play a huge part in our overall wellbeing – after all, in normal times, the average full-time worker in Australia works 40.6 hours per week (that’s just under a quarter of our week). During the pandemic, where almost everyone was working from home, this number no doubt ballooned.  The work we do directly impacts every level of Maslow’s Hierarchy of Needs.

Considering it can have such a profound impact on our lives, it’s no surprise to learn that the mental health effects of unemployment can be extremely troubling.

Unfortunately, job loss is one of those life events that many of us are bound to experience – despite its frequency, the emotional impacts are significant and many experts have noted that the impact of job loss can be similar to that of bereavement.

After leaving a job, the most obvious loss is that of an income. In the case of redundancy there is often a pay out of some kind but even that can be short-lived and meagre in comparison to a full income. According to the Australian Psychological Society’s 2015 Stress and Wellbeing Report the number one cause of stress amongst Australians (at 49 percent of respondents) was personal finances – a stress that is only made worse when a source of income is taken away. This was in 2015. We would suggest this figure has probably risen due to the impact of the pandemic, job insecurity and unprecedented debt levels.

No income = short-term perspectives

No one wants to be without a steady income but it is an unfortunate reality that it will happen to many people over the span of their lives – perhaps several times.

A study based on research by Princeton University took a look at the decision making of those who were considered to be in poverty – a group of 464 sugarcane farmers in India. The farmers relied on the harvest for 60% of their income and the study tested their IQ both before the harvest and after it, finding that their IQ was 13 points lower before the harvest, the equivalent of losing a full night’s sleep.

It wasn’t that the farmers were actually less intelligent, their priorities were simply different and it caused them to make poor decisions – a fact that can bleed out into an individual’s entire life.

A lack of income drives many people into survival mode, simply considering what it will take to survive until tomorrow, rather than making decisions that will benefit for years to come. This survival instinct can be seen in a study by De Witte, Hooge and Vanbelle in 2010 where they found that “The long-term unemployed score significantly lower for employment commitment, and especially job-seeking behaviour compared to the short-term unemployed.”

Money matters but it’s not all about finances

Everyone dreams of winning the lottery and becoming rich overnight, but taking a close look at winners of British Football Pools, found that plenty of them fulfilled ‘the dream’ of many and quit their jobs to enjoy their winnings but they then came up against lost relationships and decreased feelings of accomplishment.

Losing a job is not just about losing money – it’s losing routine, colleagues, chances to exercise skills and achieve something. De Witte, et. al found that those who were unemployed for the short-term had a psychological wellbeing that was problematically low and, while it was considered to be possible to adapt to being unemployed, as mentioned earlier, motivation levels of getting back into employment dropped to worrying lows.

No matter whether individuals left a job of their own accord or were made redundant, short-term or long-term, they report around 30% more negative emotional experiences in their day-to-day lives compared to those who are employed. Unemployment, before it’s time to retire, is not a desirable position to be in. Being in a steady job, with a steady income and all the benefits to wellbeing a job brings is important for every individual. Of course, almost everyone will experience either redundancy or voluntary unemployment at least once in their lives, for varied lengths so it’s important that organisations are considering how they can help their leaving employees in their career transition.

This Mental Health Week, take some time to consider how providing an outplacement program can assist your exiting employees in their career transition and take any action you can to ensure that you can lesson the emotional blows of losing a job.

Any positive change is a step forward in helping improve the mental health of both employees and the workplaces they leave behind. 

Need help in finding a new career path?

My book, Career Clarity: how to find career fulfillment and my online course, Career Clarity helps you to work through all those mental blocks you might have around finding a new job or career.


To find out how you, your colleagues, family or friends can do better in their careers, go to Career365 and check out our online programs or career based books in hard cover or in e-book format here.

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