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Downsizing in America: A Mental Health Crisis

 

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What long-term psychological impacts do layoffs and downsizing in the United States have for employees? What happens to those who are left behind? Many companies would argue that layoffs are necessary, helping stagnating businesses grow by reallocating resources. It is not uncommon for large companies to go through restructurings that displace hundreds or thousands of workers.

Unfortunately, modern businesses rarely consider the human element of their operations, and there is a great cost to the former employees affected by layoffs. The significant effects that layoffs have on the mental health of employees is associated with higher rates of both physical and mental illness, and higher mortality rates.

Most of us know at least one person who has been let go from their job through no fault of their own. If you haven’t experienced it for yourself, it can be hard to fully understand. Imagine your life’s work with a company for many years was suddenly cut short without warning. How will you support your family? Where would you go to find another job?  These are questions that many fail to ask themselves until it’s too late.

In 2023, tech giant Google suddenly let go of around 12,000 employees, with the CEO on record claiming that there will be more to come. No one is completely safe from the effects of downsizing. It could be your friends, relatives, children, or grandchildren.

The consequences of these events should not be taken lightly. Layoffs can lead to negative mental health effects including anxiety, depression, and more. Dr. Carl Van Horn is a professor at Rutgers University, specializing in workforce and unemployment policy. On this topic, he says:

“Losing a job and being unemployed for a long period of time is a psychological trauma and a financial trauma, and the two are closely intertwined,” … Mental health support can be lifesaving, he says. While psychologists can’t solve the economic problem, “they can certainly help people cope and manage it.”- from the American Psychological Association.

Some may argue that because these mental health problems can be at least partially remedied through therapy, downsizing must not be that big of an issue. However, in addition to mental and emotional trauma, layoffs also have adverse physical effects on individuals which can include weight loss/gain, insomnia, nausea, and fatigue. Left unchecked, the effects of chronic stress can wreak havoc on the body.

In addition to physical and mental distress, downsizing may also have an effect on mortality. A study from Finland in 2007 found a strong association with unemployment and a reduced life expectancy. An additional study was then published in 2020, reaffirming the findings of the original.

Critics might argue that because these studies were conducted in Finland, they do not accurately represent the situation in the United States. I believe it is important to note that Finland is consistently rated as one of the happiest countries in the world and has ranked #1 for the past 10 years, based on factors including healthy life expectancy and social support. In contrast, the U.S. has been declining in levels of happiness in recent years. If mortality rises noticeably in individuals who live in one of the happiest countries in the world, how likely is it for people living in a country with a measurably worse standard of living and less social support systems in place?

The situation for surviving employees of organizations that have laid off workers isn’t much better. Survivors of layoffs are far more likely to be less motivated, overworked, and express negative views towards their employer. Affected businesses will also struggle with higher turnover rates, further fueling a cycle of decreased productivity.

So, what can people and businesses learn from this information? First, layoffs are harmful to the physical and mental well-being of current and former employees. These effects are often stronger among older workers or those who have been with a company for many years. Downsizing may not always be avoidable; however, it should only be considered as a last resort. Modern businesses have become too complacent in following short-term profits to look ahead and see potential future issues. 

After downsizing, companies should be responsible for providing resources to assist former workers who need additional help. For individuals who have lost their jobs and those struggling with mental health, seeking a therapist can help ease the burden greatly. Meanwhile, those of us with the privilege of having a stable job should ask ourselves, “What would I do if that suddenly changed?”

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