The Psychological Impact of Unemployment

by Jeffrey D. Yergler Ph.D on August 21, 2012

I was recently invited by the Commonwealth Club in San Francisco to give a presentation that addressed the psychological impact of unemployment. The event took place Monday evening, August 20. The following information contains key points that were made during the presentation.

What is often buried in the monthly unemployment numbers provided each month by the Bureau of Labor Statistics, is an understanding of the psychologically traumatic experience of involuntary job loss and ongoing unemployment. I argue that this experience is critical to understand because it can inform how hiring managers, humanresource professionals, and small business owners can feel more confident about hiring the unemployed…especially the longer term unemployed (those unemployed for 27 weeks or longer). My findings are based on over 40 in-depth interviews with laid-off senior executives to line employees who were living from paycheck-to-paycheck.

When a job loss is experienced as psychologically traumatizing, there are two major areas that are impacted. First, people’s world view or their “fundamental assumptions” about the way the world works changes dramatically.  Where they once saw the world as generally benevolent and good, they now see the world as unpredictable and unsafe which causes loss of hope and optimism. Where they once saw the world as a place where hard work was rewarded, they now see an environment where it does not matter how much effort is applied to improve oneself or an organization. It simply does not matter. Where they once saw themselves as possessing dignity and value, they now see themselves as possessing low value and little dignity.

Just based on these changes in fundamental assumptions about the way the world is viewed and experienced, it is easy to understand why so many unemployed persons are demoralized, hopeless, and struggling with optimism. This would also explain why many hiring managers are reluctant to hire unemployed persons. They may well sense and feel the fragileness and lack of confidence lurking just below the surface in the person being interviewed. The risk is not worth it despite the fact that the individual is a good fit for a specific position.

The second way involuntary job loss and sustained unemployment can impact men and women is revealed in the disruption to specific attitudes and behaviors that are critical to daily interacting and performing:

• Loss of one’s sense of safety.
  • The experience of vulnerability and being easily threatened by others.
• Loss of trust in others and oneself.
  • The struggle to build trusting relationships with others. Lack of confidence in one’s judgment.
• Loss of self-esteem.
  • The belief that one has nothing to offer to people and employers that is valued and needed.
• Loss of intimacy.
  • The sense of being abandoned by people and communities that formerly carried great meaning.
• Loss of control.
  • The perception that others have made decisions that have negatively altered an entire life trajectory.

Looking, then, at the experience of unemployment through the lens of psychological trauma, it makes perfect sense why the unemployed, especially the longer-term unemployed, are often passed-over for any consideration despite the fact that they possess the basic skillset required by the position description. Simply put, the unemployed often represent too much of a financial and behavioral risk for an organization.

I suggest, however, that businesses have a marvelous opportunity, when they prepare and plan accordingly, to hire an unemployed person and to help rebuild what was lost through the experience of unemployment. The reality is that people do recover from traumatic experiences. They can emerge stronger, wiser, more thoughtful, more generous, and more effective professionals.

This is the work that I am committed to not only as a professor (as I work with many unemployed adult students) but also in my role as a consultant with organizations. I am finding that organizations, though they want to be intentional about hiring the unemployed, often need specific coaching on how to create the type of environment that will cultivate and foster employee engagement for those formerly unemployed persons. Despite the additional effort and hard dollars required to make this happen, it is the right thing to do for businesses given this season of massive unemployment. It also gives businesses an incredible competitive advantage. Being strategic and intentional about rebuilding employee engagement with the formerly unemployed not only builds commitment and gratitude but is also an incredible demonstration of social responsibility.