The new global economy and its effect on employee mental health and productivity

Jonathan Kates

Author’s note: This blog post was adapted from an assignment submitted for PPG1005: The Social Context of Policy-Making

Between January and June 2015, the province of Alberta was the home to 327 suicides, a 30 per cent increase from the same time period just a year earlier. During this time, unemployment rose from 4.7 to 5.7 per cent, presenting further evidence that there is a direct correlation between employee mental health and an uncertain labour market. The transformation of the global economy, such that the profit is valued comparatively higher than employee training and retention strategies, has been causing and will continue to cause mental health concerns for an increasingly large percentage of the global work force. As employment continues to shift from well-paying full-time jobs to more part-time positions with depressed wages and limited benefits (if any), the glut of low-skilled employees will be increasingly desperate and competitive for the few low-skill/high-salary jobs that are both here in Canada and around the world.

This growing disparity between high-skill and low-skill workers has been well-documented in important publications around the world, but three key events in the last 20 years have been particularly troublesome for steady base wage jobs in Canada: the North American Free Trade Agreement (NAFTA) and the subsequent expansion of cross-border trade that saw automotive and other manufacturing jobs move from Canada and the US to Mexico; the general 21st century shift to a globally competitive knowledge and skill-based economy; and the 2008-09 recession that depressed markets and forced layoffs.

John Pryor, director of the Cooperative International Research Program at UCLA’s Higher Education Research Institute, told the New York Times in 2011, “Paternal unemployment is at the highest level since we started measuring…More students are taking out loans [and] we’re seeing the impact of not being able to get a summer job…We don’t know exactly why students’ emotional health is declining, but it seems the economy could be a lot of it.”

Looking forward, the sharp decline in oil prices and the volatile commodities market have caused panic in affected markets like Alberta. So far only preliminary and anecdotal evidence is available to prove the downturn’s effect on mental health for laid-off workers. But time and time again it has been shown that unemployment has negative consequences for mental health—so Alberta should be worried. Newfoundland should be concerned as well as they continue to shed jobs.

Aside from the commodities sector, middle class jobs are disappearing all over Canada. Well-paying factory jobs from the 1960s-80s sparsely exist in the digital age, to such a degree that coding, a skill unheard of amongst the masses even 10 years ago, will be introduced as part of the elementary and secondary curriculums in British Columbia over the next three years. Other in-demand positions are managers, product developers, and specializers who possess specific valuable knowledge above their colleagues. That’s partially to explain why Canadian university enrolment is at an all-time high; ironically, that can also partially explain why more students than ever are entering university with pre-existing diagnoses of mental illness.

The fight to avoid unemployment, underemployment, precarious employment, and informal employment has put a lot of pressure on workers and individuals interested in entering the labour force to sharpen their skills and stay ahead of the competition. However, what some may not realize is that the mental health status of employees is related to their productivity as well. If an employee need not worry about when his/her next shift will be, or how many hours he/she is likely to work the following week or month, the employee can plan better, work towards long-term goals, and generally be more productive. Stabilizing working conditions so that employees feel much more secure about their chances of being employed in the short, medium, and especially long-term will cause stress levels to decrease, overall health status to increase, and worker productivity to increase. Lower worker productivity affects economic output, both at the firm and market levels, so it is not unreasonable to question whether the fractured labour market structure has been cumulatively more economically damaging than broad-based full, secure employment.

Businesses must also be aware that simple accounting practices do not entirely explain a company’s financial situation, since traditional performance metrics cannot measure an individual employee’s productivity or stress levels. Both of these variables are key functions of a business’ performance, and management teams should weigh them as such when reviewing business practices and company objectives. This can also help us explain why some economists think that the Gross Domestic Product (GDP) is not the only way to measure progress, and how other measures like the Happy Planet Index and the Gini Coefficient can provide governments and policy makers a supplementary analysis of macroeconomic conditions.

On the surface, investing in employees in an unstable economy may be seen as bad business, but the empirical evidence suggests otherwise. Investing in employees, either through increased training or simply through targeting retention, is actually mutually beneficial for both the employer and employee. In the United States and Spain, grocery stores that provided their employees with above-average training and/or maintained a higher percentage of full-time workers with better starting salaries produced substantially higher profits per square foot compared to their competitors. For example, Costco demonstrates how selling products for relatively cheap does not mean that employees are not worth respecting, since 98 per cent of store management started on the floor as stockers and clerks. Peer-reviewed studies in Portugal and India have also demonstrated that employees with increased training have shown slight but statistically significant increases in productivity compared to colleagues who did not receive the training.

A 2014 article from The Economist entitled “Means and Ends” lays out the challenging conundrum that businesses will have to confront: in the face of rising inequality, education and training programs may not be enough to re-distribute wages effectively among employees of different skills levels. Government policies designed to strengthen the social safety net will be more expensive for employers such that they discourage new hiring. On the other hand, low wages and reasonable social benefits may dissuade employees on the margin from entering the labour market, an option that governments cannot afford as their own expenditures rise; keeping and ideally growing their tax base is crucial. Until that happens, uncertainty in the labour market will continue to plague employees in precarious employment situations, particularly in respect to their mental health status and how that contributes to a concerning dead weight loss in productivity.

 

Jonathan Kates is a is a 2017 Master of Public Policy candidate at the University of Toronto’s School of Public Policy & Governance. He holds a bilingual Bachelor’s degree in International Studies and Sociology from Glendon, and his areas of interest are education, social policy, cities, and government accountability. His favourite food group is pizza.

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