“Every morning, before I even get out of bed, I’m overcome by a sense of dread,” says Kara, a 41-year-old tech worker, based in New York City. She’s been at her company for four years – but she says she “knows” she’ll probably get cut. “I’m basically 100% sure that one of these days, I’ll get the email saying that my position’s been eliminated … It’s just a matter of time.”
For Kara, whose full name is being withheld for career considerations, layoffs have already had a considerable impact on her life, even though she hasn’t lost her job. She’s anxious, sleeps poorly and cries a lot, she says. “It’s the uncertainty that’s the worst. Part of me thinks I should just resign to save my nerves, but it might be exactly the same somewhere else,” she says. “Job security in this sector is basically a myth.”
As layoffs have swept the globe in the past year – and particularly in the past four months – thousands who considered themselves relatively secure in their positions have found themselves out of work. In tech, for instance, companies cut more than 150,000 workers in 2022, according to tracking site Layoffs.fyi; this year already, they’ve trimmed almost 76,000 more roles. In the finance industry, Goldman Sachs, Morgan Stanley and Citigroup have slashed thousands of positions. And many other industries have also been touched by the redundancies: cuts have extended into the consumer retail, media, healthcare and pharmaceutical spaces.
Historically, layoffs have been part of the natural cycles of a necessarily ebbing and flowing economy. Yet experts say this wave is notable for several reasons.
The first: their scope and scale, especially in light of the fact that the underlying economic fundamentals are showing improvement. During the global Great Recession, by contrast, hundreds of thousands of jobs were cut but as a direct reaction to a massive slump in the value of assets around the globe, upending livelihoods and wiping trillions of dollars off the value of international stock markets for a sustained period. But that’s not the case now, even as layoffs and job insecurity proliferate.
In the US, for instance, the 2008 financial crisis and following recession saw the unemployment rate peak at 10%, with some 15 million people registered as unemployed due to a systemic and protracted slowdown in economic activity. Today, the unemployment rate is around 3.5%. During the 2011 eurozone crisis, unemployment in the European Union surpassed 11.5%, compared to a current rate of below 6.5%.
A second reason the redundancies are noteworthy is because of the current atmosphere of the workplace itself. During the pandemic, managers championed an employee-centric style of leadership that prioritised personal wellbeing and mental health, explains Anna Tavis, a professor of human capital management at New York University. “We were encouraged to bring our whole selves to work,” she says.
I’m basically 100% sure that one of these days, I’ll get the email saying that my position’s been eliminated … It’s just a matter of time – Kara
As a result, many workers are feeling a sense of cognitive dissonance – both those laid off, and others like Kara, who live in fear of being axed next. Tavis explains that during Covid-19, they were told one thing – but now they’re experiencing something that discredits that narrative. “It’s making leadership seem inauthentic, and that’s understandably having an impact on employee trust in leadership,” she says.
Some experts warn that if waves of layoffs like the ones we’ve recently seen – or even just the looming possibility of such cuts – continue to be part of working life, organisational cultures could also deteriorate, having a grim ripple effect on everything from employee engagement and productivity, to physical and mental health. And what’s worse, these conditions could touch generations to come.
A human toll
Notably, job cuts can have an immediate effect on wellness: a wealth of research shows that being laid off increases the risk of a host of health conditions.
One of the most comprehensive summaries of more than 300 studies on this subject shows that unemployed people are more distressed; less satisfied with their lives, marriages and families; and more likely to report psychological problems than the employed. Being made redundant has been linked to a much higher risk of suicide and higher rates of mortality more generally in the decades after being cut.
Separate research from 2009 shows that, for employees with no pre-existing health conditions, the likelihood of developing a health condition increases by 83% in the first 15 to 18 months after a layoff, with the most common conditions being stress-related illnesses, including hypertension, heart disease and arthritis.
But it’s not only the laid-off workers who stand to suffer in a layoff economy. As workers like Kara know, even before any cuts have been announced, the possibility and fear of being made redundant can also have a bearing on mental health and productivity. Writing in Harvard Business Review, executive coach and author Melody Wilding, explains that job insecurity can erode motivation and lead to mental-health issues, such as anxiety and depression.
Mixed messages about employee-wellness prioritisation have also been unsettling to workers, often to detrimental effect.
During the pandemic, employees demonstrated a shift in their priorities and a change in their professional ambitions. Importantly, they started investing more in their mental health. Employers, in many cases, recognised these calls for better support; many leaders opened conversations about introducing policies, programmes and tools to help struggling employees.
Experts say that even the looming prospect of layoffs can affect mental health and job performance (Credit: Getty Images)
Corporate dialogue also opened around establishing at a future in which terms like burnout, stress and depression would no longer be associated with weakness, and carry the burden of stigma in the workplace. For younger workers who have entered the labour market for the first time during the past few years, the employee-centric company that purportedly champions mental health and wellbeing might be the only impression they’ve ever had of the working world.
The problem, however, is that this emphasis on personal wellness serves in stark contrast to the reality many workers are living now. Data shows precarity of the current labour market is eroding their wellbeing: a recent global survey of 35,000 workers showed that some 52% of respondents are worried about the impact of economic uncertainty on their job security, and that more than a third are explicitly concerned about losing their job.
Indeed, research by Maureen Dollard, a professor of work and organisational psychology at the University of South Australia, shows that employees in less psychologically healthy environments – which she defines as environments in which emotional wellbeing is not ignored – took 43% more sick days per month. Her research has also shown that stress can increase the risk of sustaining injuries at work.
Other experts, like Bentley University professor of management and psychology Aaron Nurick, emphasise that layoffs can also impact those who don’t lose their jobs in the form of what he describes as “survivor’s guilt” – a sense of “I might be next”.
Anthony Klotz, associate professor at University College London’s School of Management, echoes this. He says that, at least temporarily, “layoffs make the work experience less pleasant for those who remain, and it’s not hard to imagine that these negative effects are lasting in many cases”.
Not only have these cuts chipped away at the mental health of people in the workforce, but they also may be changing employees’ behaviour – even stunting their career development and relationships to work overall.
For instance, writes Wilding: “If you feel helpless in the face of upheaval at your company, you may retreat and pull back on your efforts, which renders you a more likely candidate for cuts.”
Employees who were told during the pandemic that their organisations were employee-centric and cared about their wellbeing simply don’t want to work for people who they feel they can’t trust – Anna Tavis
Additionally, in this environment, writes Bentley’s Nurick, “[people] may be more careful about what they say and do. Employees don’t want to be noticed, because that makes them more vulnerable. It’s like animals in the wild – they’ll do whatever it takes to camouflage themselves and fit in. It’s an element of basic survival.” Dollard’s research also shows that these employees were significantly less productive at work.
Job insecurity might also lead to behaviours like quiet quitting – doing the bare minimum required to stay in a job. “Employees who were told during the pandemic that their organisations were employee-centric and cared about their wellbeing simply don’t want to work for people who they feel they can’t trust,” explains Tavis. “They’re angry.”
Creativity can be a cost of layoffs, too. “Remaining employees are more careful and cautious, which means they don’t engage in behaviour that could result in innovation,” writes Nurick. “No one seems to want to fail.”
Additionally, Klotz points to research showing that employees who are laid off are much more likely to voluntarily quit jobs in the future, relative to those who have never experienced a layoff. “One might think that the harmful effects that layoffs have on laid off employees’ trust is limited to the company that laid them off,” says Klotz. “But this research suggests that being laid off makes it more difficult to build strong bonds with future employers as well.”
For workers who are not laid off but fear that they might be, Klotz – who is credited with coining the term ‘Great Resignation’ in 2021 – says that a common response to feelings of job insecurity is to start searching for other jobs.
“Loyalty comes from reciprocal loyal treatment between companies and employees. Typically, feelings of loyalty would act as a force that keeps employees from seriously entertaining outside job offers,” says Klotz. “But in the wake of layoffs, remaining employees are less likely to feel a sense of loyalty, given that the company has just shown its willingness to unilaterally break ties with sometimes thousands of workers.”
Academics and other experts are adamant that for many who are laid off – as well as for many of those who remain after their companies makes sweeping cuts – these effects will linger. Worse still, the more frequently layoffs are executed as an ostensibly necessary step to counteract economic headwinds, the more engrained they will become in the culture of business and the more normalised they will be. This leaves workers in a deeply precarious position, as they steep in the fear of losing their job at any moment.