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With so much talk of the Great Resignation and employees in the driver's seat, it's easy to overlook the prevalence of job insecurity. That fear still lurks in the minds of workers. It might be having a bigger impact on your teams than you recognize.
Early in my career, I was at a company that went through months of rolling layoffs. A year of seeing co-workers let go. There was a complicated mix of relief followed by some combination of survivor's guilt and winner's remorse. Who wanted to be there?
Those left after each round were less grateful than you might expect. They were weary. And distrustful.
Morale was below low. It was hard to focus on being productive, much less do good work. Gallows humor ran rampant. With no trust in leadership as a moderator, some were defiantly not working. And their misery wanted company.
The lesson for employers: when circumstances increase uncertainty — whether just within your company or in the world at large — you have to be more deliberate and proactive to mitigate the damaging, negative effects of insecurity.
The Covid-19 pandemic hauled the U.S. economy into the “most unequal recession” in modern history as 9.6 million workers lost their jobs, and minority groups were disproportionately affected. Globally too, job losses amounted to 114 million in 2020.
Job insecurity has always been a source of anxiety for employees during periods of economic recession and political upheaval. But the number of people feeling insecure about their jobs shot to record-high numbers during the pandemic. The magnitude and speed of upheaval left even the employed feeling insecure. Even with many returning to work and an improved unemployment rate, anxiety due to job insecurity continues to mount for many.
As much as the pandemic was a public health crisis, the effects of job insecurity — the fear of financial insecurity, loss of identity, loss of social support and networks, for some employees potentially housing or food insecurity — all of these stressors amount to another threat to public health.
Job insecurity, and the perception of job insecurity, also drag down individual performance at work, as well as team morale and productivity.
The damaging impact on mental well-being, and the resulting toll on physical health and social status, points to a need for change. Employers need to step in with empathetic leadership and prioritize mental well-being to reduce the feeling of job insecurity among employees.
But first, let’s understand what job insecurity is, how it feels, what affects perceptions of job insecurity, and why the negative effects are dire enough to warrant action.
What is job insecurity?
Job insecurity is the fear of losing your job and not having power over whether — and for how long — you’ll continue in your role. Plenty of people lose their jobs every day, and it isn't pleasant. But job insecurity extends beyond the current job — it is a loss of agency, feeling as if you have lost control over your employment status.
One of the most insidious elements about job insecurity is that it’s incessant and often long-lasting. It isn’t one event or a point in time. It is “anticipatory anxiety” — where every day feels like you’re one step closer to getting fired without knowing when or if you’ll actually get fired. This uneasy feeling of doom can linger over weeks or months, leading to chronic stress and impacting your emotional well-being, your performance, and your relationships.
The negative consequences of job insecurity are far-reaching.
A job is linked with many aspects of a person’s life — an insecure job threatens not just a loss of income, but a loss of healthcare and retirement benefits, career growth, and activities or hobbies outside of work that are possible because of the income. A job is also linked to routine and purpose, a distinct work environment, colleagues, work-related interests and goals — in other words, for many people, our working life forms a significant part of our life.
This interconnection makes the vision of a job loss scary and more intense.
The causes of job insecurity
The pandemic brought job insecurity into sharper focus, but the anxiety was present beforehand and will persist beyond. Factors like company mergers and acquisitions, the growing popularity of the gig economy, downsizing, and a dependence on social safety nets like healthcare also contribute to the feeling.
The economic fallout of the pandemic
According to research by the London School of Economics, watching people lose their jobs creates significant anxiety even among employees who retain their jobs. The negative impact on collective well-being is “four times the effect on the individual alone.”
These numbers further put the community impact of job insecurity into perspective: In the week that Covid-19 was declared a pandemic, 33% of Americans reported that they, or someone in their household, faced a job loss, pay cut, or both. Since February 2020, a total of 5 million jobs have been lost due to the pandemic.
The constant news and proximity to layoffs and business closures led to a heightened sense of job insecurity among people as they grappled with the fear that their jobs might be next in line.
Uncertainty of the gig economy
Consultants, independent contractors, and freelance workers are estimated to constitute 35% of the American labor force. Many choose this type of work for its autonomy and flexibility, but they are on temporary contracts. Once their current contract is up, there is no assurance of continued work.
In a study of 65 gig workers, respondents reported experiencing personal, social, and economic anxieties because they don’t have the job security tied to an assured salary and benefits each month. When work dries up, as it did without warning at the outset of the pandemic — and as it did on 9/11 and when the financial crisis hit New York in 2008 — those with temporary contracts are the first- and worst-hit.
To add to the stress this sector was facing, many laid-off workers landed in the gig economy to find temporary or casual work. Some, especially women and parents, chose to become gig workers due to safety concerns and childcare needs. But larger numbers in their part of the labor market also meant a growing sense of job insecurity, where workers know in their hearts that they may get “discarded … when the job is done.”
Business transformations: Downsizing, mergers, and acquisitions
Company reorganization to boost profits or avoid bankruptcy is often accompanied by a “planned elimination” of a large number of employees. We tend to think of mergers and acquisitions in pure business terms, but it’s the people in those companies that are really coming together. The uncertainty, job losses, and potential culture clashes lead to increased stress levels and anxiety among employees.
The consequences of job insecurity
Job insecurity has far-reaching consequences and comes at a steep cost to mental well-being and physical health. Prolonged feelings of anxiety, anger, and/or burnout from job insecurity can affect our mental health and general health in ways that show up as sleep problems, inability to manage anger, substance misuse, weight gain, heart disease, clinical depression, and even suicide.
Negative behaviors can emerge in response to these ongoing stressors. Together with not feeling well, they tend to reinforce negative coping tactics and crowd out productive action. Rather than reaching out and building work-related connections and skills to lessen the actual risk factors and perceptions of job insecurity, a person consumed by an insecure job may sever work-related relationships and damage the personal relationships they lean on for social support. In this way, the effects of job insecurity can lead to isolation and loneliness, as well as unemployability.
Low morale and motivation among workers
Stressing about job loss and its effect on other aspects of life makes it difficult for employees to focus on the present and stay motivated in their roles. Understandably so, because it seems pointless to put effort into a role that you may not have in the near future. Those who adopt a proactive stance are updating their LinkedIn profiles. The less proactive are scanning every communication from leadership for omens and comparing notes with their peers. This contagious loss of motivation and perspective can lead to a false assessment of their own risk factors and the predictors and prevalence of job loss. It can lead to poor performance, deeper ramifications at work, and a lower sense of self-worth.
After all, employment has long been equated with a sense of moral worth and is an intrinsic part of a person’s social identity. The potential loss of this income, identity, and social status can feel scary and shameful, affecting your overall morale. In the case of organizational restructuring, where performance and attitude matter, the impact of job insecurity can be to actually make your position less secure.
Chronic stress and burnout
Job insecurity for a prolonged period of time leads to chronic stress and burnout. Workplace stress is responsible for $125–$190 billion in annual healthcare costs, including more missed work and showing the enormous impact it has on people's well-being.
Poor mental health often leads to, and feeds on, poor emotional regulation. Your mind may fixate on problems, making it difficult to seek solutions or experience even momentary life- or job- satisfaction. This is a hindrance to productivity, decision-making capabilities, and overall day-to-day functioning.
Increased risk of diabetes and heart problems
Chronic stress is associated with increased rates of heart disease and metabolic disorders. People who experience increased work-related stress due to job insecurity have a 19% greater rate of diabetes diagnosis. While stress alone does not cause diabetes, it can impact insulin production and lead to unhealthy habits like overeating and decrease the motivation and sense of self-worth that fuels healthier habits like exercise or healthful eating. All of this contributes to the risk factors for diabetes and making it harder to manage.
Constant stress also results in burnout, which in turn can physically damage your heart. One longitudinal study found that prolonged burnout increases the risk of atrial fibrillation, an irregular heart rhythm that can lead to blood clots, stroke, and heart failure.
7 strategies to reduce job insecurity
Organizational psychology provides insight into ways to promote psychological safety in the work environment. These same approaches can help to reduce uncertainty and promote greater security around jobs among employees, even during times of layoffs, downsizing, or restructuring.
Happy and motivated employees are 31% more productive. But expecting happy and motivated in times of organizational or global duress might be unrealistic. To really overcome job insecurity, employers need to build trust in good times, and maintain trust and transparency in bad times. They need to lean on the interventions that come out of applied psychology and acknowledge that employees need mental and social support.
1. Be empathetic and acknowledge employee anxiety by listening
An empathetic manager can make a huge difference in how employees deal with job insecurity. They are able to understand how employees feel and acknowledge their fears in a sensitive manner. Provide an outlet for employees to share their anxiety, preferably in a one-on-one setting, and validate their feelings so they feel heard and supported.
2. Keep employees informed about their job status
Managers often become withdrawn when job loss is imminent but it is because they have little control over the decision. But managers need to be honest and transparent about developments within the company, especially in uncertain times, because that’s when employees are paying close attention. If the company is stable and there is no likelihood of job losses, address any rumors that may be doing the rounds.
3. Declare your intent to help, even in the event of job loss
Leaders have a lot of power to support their teams after a job loss. Having a leader on your side and rooting for you can make an employee feel valued and confident about opportunities in the future. If downsizing is a possibility, assure your employees that you will help and guide them with resources, references, and introductions within your network.
4. Make training opportunities available
Give training and upskilling opportunities to employees to help them feel confident in their growth and development path. Research shows that participation in training, even in an uncertain work environment, reduces job insecurity among employees.
5. Offer contract work with benefits to assuage financial fears
While not ideal, employers can discuss the prospect of temporary contract work with laid-off employees. This gives employees some hope of continued employment, even if it is not full time.
6. Provide mental health coaching
Job loss isn’t always avoidable, but employers can — and should — help their employees manage stress through practical solutions like one-on-one coaching. At a time of a global health challenge, 90% of employees are not mentally ill, but neither are they performing at their best. They are languishing, and even a slight hint of job insecurity could act as a downward trigger. Coaching empowers employees to develop the skills and behaviors needed to stay confident and work towards their goals, even in an uncertain environment.
7. Create team bonding opportunities
One study of coping strategies showed that social interaction and team support helped reduce the feeling of job insecurity, especially among women. Create opportunities for teams to bond — like a circle of appreciation where each employee shares one thing about a team member they appreciate — so that employees don’t feel alone and are able to forge deeper connections with their coworkers.
Job security leads to psychological safety and engaged employees
Support for employee well-being can contribute to a sense of job security and job satisfaction. Creating an environment that enables employees to bring their whole selves to work, including their feelings and vulnerabilities, can build the kind of trust and transparency that doesn't let job insecurity take root. In tough times, a culture of support and inclusion works against the insidious effects of insecurity. Employees and leaders are ready to step up and lean in when uncertainty looms.
Employers need to step up and create psychologically safe environments where employees can be less worried about keeping their jobs and more focused on doing their jobs. BetterUp can help.