When work disappears: The impact of job loss on mental health

Introduction

In a labour market shaped by automation, economic uncertainty, and restructuring, job displacement is an increasingly common reality for many Australians. But the impact goes well beyond lost income. Research shows that job loss can profoundly affect mental health, fueling anxiety, depression, and long-term psychological distress. For HR professionals, psychologists, and individuals navigating this transition, understanding these effects is critical to building effective support strategies.

The Hidden Cost of Job Loss

A job is more than a source of income. It offers identity, purpose, routine, and social connection. When this is suddenly removed, individuals often experience:

• Reduced self-esteem and confidence
• Heightened anxiety and depressive symptoms
• Social isolation and disengagement
• Distress linked to uncertainty about the future

A meta-analysis published in the Journal of Affective Disorders found that unemployment is significantly associated with poor mental health outcomes across diverse populations and economic contexts. The impact was particularly severe in individuals facing long-term unemployment or limited access to mental health support (Paul & Moser, 2009; Milner et al., 2016).

Australian Insights: What the Research Tells Us

Recent Australian studies reinforce the seriousness of the issue:

• A 2023 study in Labour Economics found that job displacement negatively affected both the displaced individual and their family’s overall wellbeing, with higher psychological distress reported among women (Wilkins & Wooden, 2023).
• Another study tracking Australians over 16 years found that job loss had long-term effects on both income and mental health. This included increased use of outpatient and inpatient mental health services post-displacement (Eliason & Storrie, 2024).

These findings highlight the need for integrated approaches to workforce transition — combining career support with mental health care.

Who’s Most at Risk?

While job loss can affect anyone, some groups are more vulnerable to poor outcomes:

• Older workers, who may find it more difficult to retrain or re-enter the workforce
• Casual, gig, or low-skilled workers, who often lack employment protections or savings buffers
• People with pre-existing mental health conditions, who may experience a worsening of symptoms
• Sole earners or caregivers, for whom financial strain adds additional emotional stress

What Can Help?

Evidence-based interventions can make a significant difference in mental health outcomes after job loss. These include:

1. Early access to psychological support

Through Australia's Medicare-subsidised Better Access initiative, individuals can access up to 10 sessions with a registered psychologist each year with a referral from a GP.

2. Practical employment support

Resume workshops, training subsidies, and government-funded job placement programs can help shorten the duration of unemployment and reduce stress.

3. Workplace exit support

Outplacement programs, transparent communication, and mental health referrals from employers can ease transitions and preserve trust.

4. Community and social connection

Encouraging social interaction — through volunteering, support groups, or mentorship can help individuals maintain self-worth and routine during periods of unemployment.

Final Thoughts

Job loss isn’t just an economic issue — it’s a mental health one. For those affected, it’s important to know that seeking support is not a sign of weakness, but a proactive step towards recovery. For HR leaders and mental health professionals, recognising the emotional toll of job displacement can lead to more compassionate and effective strategies that help people rebuild their lives and careers.

References

Milner, A., Page, A., & LaMontagne, A. D. (2016). Long-term unemployment and suicide: A systematic review and meta-analysis. Journal of Affective Disorders, 210, 235–244.

Paul, K. I., & Moser, K. (2009). Unemployment impairs mental health: Meta-analyses. Journal of Vocational Behavior, 74(3), 264–282.

Eliason, M., & Storrie, D. (2024). Job displacement and long-term mental health: Evidence from health care utilisation. Psychiatry Research.

Wilkins, R., & Wooden, M. (2023). Household responses to job displacement in Australia. Labour Economics, 84, 102406.