Work & Stress, 2013

Vol. 27, No. 4, 321338, http://dx.doi.org/10.1080/02678373.2013.846948

Depression in the workplace: An economic cost analysis of depressionrelated productivity loss attributable to job strain and bullying
Wesley P. McTernana*, Maureen F. Dollarda and Anthony D. LaMontagneb
a

School of Psychology, Social Work and Social Policy, University of South Australia, Adelaide,
Australia; bMcCaughey Centre, University of Melbourne, Victoria, Australia
(Received 28 June 2012; accepted 10 May 2013)

Depression represents an increasing global health epidemic with profound effects in the workplace.
Building a business case via the quantification of potentially avertable costs is essential to convince
organizations to address depression at work. Our study objectives were to: (1) demonstrate a process
path whereby job strain and bullying are related to productivity loss via their effects on depression;
(2) estimate the costs to employers of sickness absence and presenteeism that are associated with
depression; (3) investigate the relationship between depression severity and costs; and (4) estimate
the contribution of job strain and bullying to depression-related productivity loss. A populationbased telephone survey was conducted across two Australian states (N = 2074), with a one-year
follow-up (cohort design). Results confirmed job strain and bullying affected productivity via
depressive symptoms. Total national annual employer costs for lost productivity due to depression
were estimated at $AUD8 billion per annum, most of which was due to mild depression. We
calculated a population-attributable risk (PAR) estimate of 8.7% for depression attributable to
bullying and job strain, equating to $AUD693 million in preventable lost productivity costs per
annum. Findings suggest that even sub-clinical levels of depression represent a significant
productivity and economic burden not previously recognized.
Keywords: depression; bullying; job strain; presenteeism; sickness absenteeism; cost analysis;
productivity; economy

Introduction
Depression represents a growing disease burden and a rising financial burden on workers,
families, healthcare systems and businesses worldwide. According to World Health
Organization (WHO) estimates, depression is the leading cause of disability worldwide
(WHO, 2001) and will be the second leading contributor to the global disease burden by
2020. Depression is additionally a risk factor for suicide, a top ten cause of death
globally (Murray & Lopez, 1996). As a rising global concern, increased research on its
causes and effects are therefore crucial in understanding how to address depression and
minimize its societal impact.

*Corresponding author. Email: wes.mcternan@unisa.edu.au

2013 Taylor & Francis

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Understanding the predictors of depression has large implications for employers, as

depression has a considerable negative effect on organizational productivity. Understanding antecedents to work-related depression and costs to employers is crucial for its
prevention. We focus on two work-related antecedents, job strain and bullying, as
together these factors comprise around 37% of the causes of workers compensation
claims for mental stress in Australia (Australian Government Productivity Commission,
2010).
We draw on psychosocial safety climate theory to explain how job strain and bullying
arise and relate to depression and work outcomes, such as absenteeism and presenteeism.
The broad aims of the research are to demonstrate how work stress factors relate to
productivity loss, and to quantify the costs to organizations for depression related to
workplace causes, specifically job strain and workplace bullying.

Depression and costs

Depression is often used as a common descriptor for feeling emotionally low, but it may
manifest as a severe chronic clinical condition (Ghaemi & Vhringer, 2011). Clinical
depression is defined by the Diagnostic and Statistical Manual of Mental Disorders,
4th Edition, Text Revision (DSM-IV-TR; American Psychiatric Association, 2009, p. 356)
as a major depressive disorder. The diagnostic criteria for depression are depressed
mood and/or loss of interest or pleasure in activities for at least two weeks with
significant impairment of functioning, with at least five different symptoms (e.g.
insomnia, feelings of worthlessness, fatigue or loss of energy, diminished interest in
all or most activities, depressed mood, diminished ability to think or concentrate). Subclinical depression is when symptoms are not frequent enough to warrant a clinical
diagnosis.
Prevalence rates of major depression in Australia have been estimated at 6.3%
according to DSM-IV criteria (Andrews, Henderson & Hall, 2001). International
comparative rates are reported. Twelve-month prevalence rates for major depressive
episodes (which are indicative but not limited to Major Depressive Disorder) were 8.3%
in the United States, 2.2% in Japan, 4.9% in the Netherlands and 3.0% in Germany (Bromet
et al., 2011). Rates of depression over a lifetime, with one or more lifetime episodes of
major depressive disorder, are higher than the Australian 12-month prevalence, at 14.7%
of the Australian workforce (LaMontagne, Sanderson, & Cocker, 2010).
Although depression has been typically viewed as either endogenic, when caused by
internal biological influences, or exogenic, when caused by external environmental
sources (Shorter, 2007), epidemiological research throughout the 1960s and 1970s failed
to support this distinction in terms of participant outcomes (Ghaemi & Vhringer, 2011).
The current consensus is that depression arises from a combination of endogenic and
exogenic factors. Although depression can be caused by traumatic life events such as the
loss of a loved one or a debilitating injury, it can also result from chronic exposure to
stressors. In our study we investigated two important workplace stressors or risk factors:
job strain and bullying.
The impact of depression is evident in lost productivity at work, which has a
substantial economic impact on employers. Previous Australian research estimated that
lifetime major depression in the workforce costs Australia $AUD12.6 billion annually
due to associated absenteeism, presenteeism, turnover and treatment costs (Sanderson,

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Tilse, Nicholson, Oldenburg, & Graves, 2007). In the US, estimates for the cost of
depression, primarily attributable to worker productivity loss whilst at work, vary widely
from $US36 billion (Kessler et al., 2009) to $US53 billion per year (Greenberg, Kessler,
Nells, Finkelstein, & Berndt, 1996) but are nevertheless substantial. To summarize,
depression-associated costs to employers represent an important portion of the overall
societal burden of depression. For this reason we decided to conduct a study to investigate
the possible costs of loss in productivity related to employee depression.

Workplace origins of depression

Psychosocial safety climate (PSC) is a formal theory that helps describe, explain and
predict how and when work conditions affect psychological health (Dollard, 2012). One
aspect of the theory is that it explains the origins of commonly identified workplace
psychosocial risk factors such as job strain and bullying in terms of psychosocial safety
climate. Several work stress theories such as the Job Demand-Control (JDC) model of
work stress emphasize job design as the causal agent of work stress. Psychosocial safety
climate theory extends current work stress frameworks because it proposes that PSC is a
cause of the causes of these job design risk factors (Dollard & McTernan, 2011).
Dollard and Bakker (2010) argued that psychosocial safety climate concerns
management values and philosophy regarding worker psychological health, and the
priority of these concerns over competing interests such as productivity goals (Hall,
Dollard, & Coward, 2010). Management values are reflected in organizational policies,
practices and procedures that are implemented to protect worker psychological health and
safety (Dollard & Bakker, 2010). Accordingly, these management practices affect work
conditions. In organizations with low PSC, where there is a lack of concern over worker
psychological health, it can be expected that managers will not be concerned about the
deleterious effects of job demands. It can be expected that work demands will be high,
and job resources that might help workers cope with work demands, such as job control,
will be low. There is empirical evidence for this from both lagged and longitudinal studies
showing that PSC negatively predicts a range of workplace psychosocial risk factors such
as high job demands (i.e. work pressure), low control (Dollard & Bakker, 2010; Dollard,
Opie, et al., 2012; Idris & Dollard, 2011; Idris, Dollard, Coward, & Dormann, 2012; Idris,
Dollard, &Winefield, 2011; Law, Dollard, Tuckey, & Dormann, 2011), and bullying and
harassment (Bond, Tuckey, & Dollard, 2010; Law et al., 2011), that in turn are related to
psychological health.
The main proposition of the JDC model of work stress, is that job strain, a
combination of high job demands and low job control, is the most deleterious situation for
worker health (Karasek & Theorell, 1990). Under JDC theory, when workers are faced
with high demands, an increase in arousal occurs as a mild flight-or-fight response that
enables the worker to cope in the short term. If the demands are chronic and the employee
lacks the appropriate level of job control to funnel the aroused energy into an appropriate
coping response, residual stress arousal builds up and creates harmful effects on physical
and mental health. Since depression is associated with low energy and fatigue it is not
surprising that it is specified as one of four predominant adverse outcomes of job strain
(Karasek & Theorell, 1990).
Several studies support the JDC model as an explanatory mechanism for work-related
depression. A review of JDC studies from 19982007 by Husser, Mojzisch, Niesel, and

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Schulz-Hardt (2010) found evidence for the combined main effects, i.e. high demand and
low control (28 of 47 studies, 60%), as well as interaction effects of demands and control
(11 of 28 studies, 39%), on general psychological health measures including depression.
These results build on prior evidence of van der Doef and Maes (1999) from 19791997,
who found that 68% of studies showed main effects, and 48% of studies interactive
effects, on similar outcome measures. A meta-analysis by Stansfield and Candy (2006)
found that job strain significantly predicted depression among other common mental
disorders. In our study we operationalized job strain in terms of high demands (i.e. work
pressure), and low control in the form of decision latitude (i.e. discretion to utilize skills,
and authority to make decisions). Both of these kinds of control alleviate work pressure
(Husser et al., 2010).
We also expect that low PSC contexts are associated with other risk factors
and hazardous behaviours such as bullying. If policies for bullying prevention and
management are lacking, this may serve to reinforce and foster bullying. Workplace
bullying includes belittling, singling out and isolation of a targeted co-worker (Vartia,
2001). Previous research shows that job strain is associated with levels of bullying,
possibly because high job strain leads to increased competition for resources, frustration
of work goals, and increased stress and potential for interpersonal conflict (Tuckey,
Dollard, Hosking, & Winefield, 2009).
Bullying is a particularly severe form of psychosocial risk that is frequently identified
as an antecedent to depression. The relationship between bullying and depression can be
explained using Semmer, Jacobshagen, Meier, and Elferings (2007) Stress-as-Offenseto-Self (SOS) theory. According to SOS, bullying is particularly stressful as it directly
threatens the self. Bowling and Beehr (2006) argue that bullying is a threat to a persons
self-image and can lead to depression. The relationship between bullying and depression
has been consistently verified across a number of occupations and work settings, in nurses
(Quine, 2001), municipal workers (Vartia, 2001), hospital employees (Kivimaki et al.,
2003) and non-industry specific samples (Hansen et al., 2006; Neidhammer, Goldberg,
Leclerc, Bugel, & David, 1998). Given the theoretical context of PSC and the supporting
empirical evidence, we expect job strain and bullying to be predictors of depression.
Hypothesis 1. Job strain and bullying will be positively related to depression.

Depression also has knock-on effects to employers, with two important manifestations of
productivity loss due to depression being sickness absence and presenteeism. An analysis
of two national surveys found that depressed employees took 1.5 to 3.2 times as many
short-term work-disability days than employees without depression (Kessler et al., 1999).
A possible explanation is that depressed people lack energy and harbour feelings of poor
self-worth that could lead to increased levels of withdrawal and sickness absence
(Laitinen-Krispijn & Bijl, 2000).
Presenteeism refers to being at work when performance is compromised due to
illness. Workers suffering from depression may be only partly functional, depending on
the level of depression. Particularly because of the stigma attached to work-related mental
illness, it is likely that even though workers are depressed they may still turn up to work
and not reveal their depressed status. A number of studies have shown a relationship
between depression and presenteeism, many of those studies showing the economic
implications (Burton, Pransky, Conti, Chen, & Edington, 2004; Hawthorne, Cheok,
Goldney, & Fisher, 2003; Lerner et al., 2004; Sanderson et al., 2007; Wang, Simon, &

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Kessler, 2003). In one study in the US, it was found that on average, sufferers of major
depression experienced a level of productivity loss at work (i.e. presenteeism) equivalent
to 2.3 days of absenteeism each month (Wang et al., 2004).
Hypothesis 2. Depression will be positively related to sickness absence and presenteeism.

Bringing Hypotheses 1 and 2 together, we further hypothesized that depression would be

a mediator of the effect of job strain and bullying on sickness absence and presenteeism:
Hypothesis 3. Job strain and bullying will be related to sickness absence and presenteeism via
depression.

In light of these hypothesized links, we aim to assess the lost productivity costs to
employers from sickness absence and presenteeism that are attributable to depression.
In doing so our research goes beyond the usual focus on individual costs and considers
costs to the organization and society. The quantification of these potentially avertable
organizational costs (that is, depression caused by the work environment) is essential to
the development of a business case for intervention, and may help stimulate organizational interventions to improve the work environment. To our knowledge, this is the first
paper to explore associated productivity loss by severity of depression. Identifying how
the severity of depression affects productivity loss has implications both for how we
measure depression and for policy and practice (e.g. when employers or others could or
should intervene).
Moreover, the present study specifically examined lost productivity costs associated
with depression in the workplace due to two prominent psychosocial risk factors (job
strain and bullying). The added value is that this is the first study to model the effects of
both job strain and bullying on depression in order to identify the extent to which each
factor predicts depression, both individually and concurrently. Further, although bullying
has been identified as a psychosocial stressor, unlike job strain it has not been evaluated
in terms of its contribution to productivity loss due to associated depression risk.
LaMontagne, Sanderson, and Cocker (2010) found that job strain-attributable depression
accounted for $AUD730 million (5.8%) of the total annual costs of depression in the
Australian working population.
In previous research, both job strain and bullying have been theorized to predict
the onset of depression. The present study has theoretical implications, as current
perspectives may be challenged if one predictor does not predict depression when both
job strain and bullying are modelled simultaneously, or one is shown to be a greater
predictor. There is also a practical implication of this study in that it identifies which risk
factor may be more effective to target in reducing depression-related productivity loss.
We have framed the research in terms of psychosocial safety climate theory; prior
research with similar data has shown that PSC is related to both bullying (Law et al.,
2011) and job strain (Hall et al., 2012).
Accordingly, this paper has four objectives: (1) to demonstrate a process path whereby
job strain and bullying are related to productivity loss (at least in part) via their effects on
depression; (2) to estimate the costs to employers of sickness absence and presenteeism
that are associated with depression; (3) investigate the relationship between depression
severity and costs; and (4) estimate the contribution of job strain and bullying to

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depression-related loss in productivity. Our analysis focuses on the theoretically more

salient predictors of depression, job strain and workplace bullying.

Method
Procedure
The study employed a longitudinal survey design with a 12-month time lag. Data were
initially collected in 2009, and again with all measures repeated in 2010, by a multi-state
research project, the Australian Workplace Barometer (Dollard et al., 2009) (AWB). Data
were collected from two Australian states: Western Australian (WA) and New South
Wales (NSW). Participants were randomly selected from the electronic white pages
directory and were sent an introductory letter to their households with information about
the study, including notification that participants would be contacted by telephone within
the next few weeks.

Participants
Twenty thousand Australian household phone numbers were called, selecting one
participant per household who was currently employed and over the age of 18 years,
and whose birthday was the most recent in the household, to be interviewed. Of the
numbers called, 10,908 were excluded due to ineligibility and communication issues (e.g.
non-residential numbers and fax/modem connections). From that eligible sample there
was a response rate of 31%. The final sample (N = 2790) consisted of 1326 participants
from NSW and 1464 from WA. The sample consisted of 1390 females aged between
18 and 77 (M = 46, SD = 12.0) and 1396 males aged between 18 and 85 (M = 46,
SD = 12.6).
Time 2 data consisted of participants from Time 1 who agreed to take a follow-up
questionnaire one year later in 2010. Of the initial participants at Time 1, 2074
participated at Time 2 (74% response rate). At Time 2 there were 927 females between 19
and 78 (M = 43, SD = 12.3), and 1147 males between 19 and 82 (M = 44, SD = 12.5). To
ensure the sample was representative of the state populations, the data were weighted by
age and gender proportions for the state population as specified by the Australian Bureau
of Statistics (ABS) Labour Force survey (ABS, 2009).

Measures
Depression. The Patient Health Questionnaire 9 (PHQ-9) depression measure is a nineitem scale based on the DSM-IVs nine criteria of depressive disorders (Kroenke, Spitzer,
& Williams, 2001) ( = .80), e.g. during the last month, how often were you bothered by
feeling down, depressed, or hopeless? Responses were on a frequency response scale,
0 (not at all), 1 (several days), 2 (more than half the days), and 3 (nearly every day). Scores
were scaled into severity levels: 04, no depression; 59, mild (subclinical); 1014,
moderate (clinical); 1519, moderately severe (clinical); 2027), severe (clinical). These
severity scales are suggested by Kroenke et al. (2001) based on validation of scores over
10 having a sensitivity of 88% for clinical diagnosis of major depression.

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Sickness absence and presenteeism. Sickness absence and presenteeism were both
assessed using measures from the WHO Health and Work Performance Questionnaire
(Allen & Bunn, 2003). The sickness absence measure is calculated from two items: one
recording participants weekly work hours and another recording the number of days in
the previous four weeks (28 days) missed due to physical or mental health problems.
These items are combined to provide an estimated proportion of weekly work hours that
were missed due to sickness in the past four weeks. After being primed with a question
reflecting usual job performance, job performance was measured by asking participants
to rate their overall job performance on a scale from 0 (worst performance anyone
could have) to 10 (performance of a top worker) in the last 28 days. Performance loss
was assessed by deducting this performance score from the maximum score of job
performance (10). Then, by deducting the mean performance loss scores of participants
who reported no depression, from the participants who reported depression, we derived a
percentage increase in scores of performance loss that was related to depression, as an
indicator of presenteeism. This is a similar approach adopted in previous studies that have
used self-report measures of job performance loss relating to illness as an indicator of
presenteeism (Allen & Bunn, 2003; Gates, Succop, Brehm, Gillespie, & Sommers, 2008;
Ozminkowski, Goetzel, Chang, & Long, 2004). Self-report measures of presenteeism
have been validated concurrently and predictively with adverse events at work (Allen &
Bunn, 2003).

Workplace bullying. Bullying was measured using the QPSNordic approach (Lindstrm
et al., 2000). Due to problems with subjective interpretations of bullying, a definition of
bullying was provided to participants: Bullying is a problem at some work-places and for
some workers. To label something as bullying, the offensive behaviour has to occur
repeatedly over a period of time, and the person confronted has to experience difficulties
defending him or herself. The behaviour is not bullying if two parties of approximate
equal strength are in conflict or the incident is an isolated event. Participants were then
asked, have you been subjected to bullying at the workplace during the last six months?,
with responses of yes, no and refused.

Job strain. Job strain was measured using demand and control measures from the Job
Content Questionnaire (Karasek, 1979). Responses for both the demand and control items
were on a four-point Likert scale from 1 (strongly disagree) to 4 (strongly agree).
Demand was assessed with five items (e.g. My job requires working very hard) and
showed acceptable internal consistency reliability ( = .67). Job control was computed as
an equally weighted scale of its two sub-dimensions ( = .78): skill discretion, or the skill,
creativity and flexibility permitted to the employee (e.g. I have an opportunity to develop
my own special abilities); and decision authority, or the employees degree of autonomy
in decision making (e.g. My job allows me to make decisions on my own). The subdimensions were combined as in previous research, to provide a measure of control
(Karasek & Theorell, 1990), which is also required to enable construction of the job strain
measure.
To create job strain categories for use in the logistic regression, demand and control
measures were dichotomized at the median and combined to create categories of low job

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strain (low demand and high control), active jobs (high demand and high control), passive
jobs (low demand and low control) and high job strain (high demand and low control).
Ties on the median were randomly assigned to either high or low.

Hypothesis testing
We first tested the mediation assumption underlying the relationships between job
stressor, depression and loss in productivity. To test Hypothesis 1, the impact of job strain
and bullying on depression, we used logistic regression controlling for covariates, (age,
gender and income) and Time 1 depression (path A). To test Hypothesis 2, we tested the
relationship between depression at Time 1 and sickness absence and performance loss
at Time 2 (the productivity loss measures were combined using standardized scores)
(path B). To test Hypothesis 3 regarding the mediating role of depression, we used the
effects from Hypotheses 1 (path A) and 2 (path B, additionally controlling for the
independent measures of bullying and job strain). According to Selig and Preacher (2008),
a Monte Carlo procedure a kind of parametric bootstrap can be used to test mediation
when estimates and standard errors for the two paths that make up the mediation process
are available. A large number of random draws (20,000) from the A and B distributions are
simulated and then the product of these values is computed. The distribution of the A*B
values is used to estimate the confidence interval for the indirect effect. The test performs
better than the Sobel test (Selig & Preacher, 2008).

Cost analyses
The cost of depression on employers for sickness absence and presenteeism due to
bullying and job strain was estimated in three steps, as set out below.

Individual productivity loss cost estimates. To determine total productivity loss due to
depression we assessed sickness absence costs and productivity loss caused by
presenteeism due to depression separately, then combined the two costs.
For the annual sickness absence costs, weekly sickness absence rates were multiplied
by 48 to obtain an annual estimate (allowing four weeks for public holidays and annual
leave) and then multiplied by the national median daily wage in 2009 (ABCDiamond,
2010). This measure is consistent with past studies on absenteeism that propose that the
cost of a days absence is equal to a days wage (Burton et al., 2004; Wooden, 1993).
Casual employees were assigned a cost of $0, to reflect that they do not receive paid sick
leave.
To estimate annual performance loss costs, participant monthly job performance
scores (010) were divided by the maximum score (10) providing a performance score of
01. Subtracting this score from 1 provided a performance loss percentage which was
multiplied by the national annual median wage of 2009 (ABCDiamond, 2010); e.g. 5%
performance loss of the median wage of $ASD42,380 would be $ASD2119. Previous
studies have combined job performance scores with average wage data (Gates, Succop,
Brehm, Gillespie, & Sommers, 2008; Goetzel et al., 2004) as a way of estimating a cost
borne by the employer when an employee is not working at the full capacity expected for
their wages. Accordingly, we multiplied only by the proportion of time participants had

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not reported being absent in the sickness absence measure, i.e. a person cannot be
unproductive at work when they are not at work.

National estimates by severity of depression. To determine the national cost of depression,

we first estimated the mean cost of sickness absence and performance loss for each level
of depression severity.
To derive cost of depression due to sickness absence and performance loss (due to
depressive illness as an indicator of presenteeism) over other causes of lost productivity,
mean costs of each category of severity of depression were subtracted from the none
category. By subtracting the none category of depression from the estimate we factored
out other causes, providing an adjusted cost estimate relative to no depression.
Next we assessed the national proportion of each depression severity, took the sample
proportion of each depression category and then multiplied it by the total number of
people in the Australian workforce in 2009.
Finally, to generate a national annual estimate of the economic cost of depression on
organizations through sickness absence and performance loss, the national proportion of
each depression severity was then combined with the adjusted cost by depression severity.

Cost of depression attributable to work factors. Logistic regression was conducted to

estimate odds ratios (OR) for both workplace bullying and job strain in relation to
depression. Depression was dichotomously categorized to either no depression (04)
or depression present (5+: all severity levels). Three demographic variables associated
with depression were also controlled for. In a study of over 2000 US citizens, frequency
of depression was found to be more common in young adults and the elderly than the
middle aged (Mirowsky & Ross, 1992); a literature review by Nolen-Hoeksema (2001)
found higher prevalence in women, which may be due to an association between
oestrogen levels and depression (Douma, Husband, ODonnell, Barwin, & Woodend,
2005; Lasiuk & Hegadoren, 2007); and financial difficulties have been found to greatly
predict depression (Kendler, Karkowski, & Prescott, 1999). Further, younger people,
women, and people with lower socio-economic status have been found to experience
higher odds of exposure to job strain (LaMontagne, Keegel, Valance, Ostry, & Wolfe,
2008). Age, gender and income were therefore entered as covariates.
The analysis was prospective; job strain and workplace bullying were measured at
Time 1 and related to depression at Time 2, controlling for depression at Time 1. As each
risk factor can co-occur, three new dichotomous variables were created using the
categorical job strain and bullying measures, for three exposure scenarios to assess the
combined exposure effect: job strain alone (in the absence of exposure to bullying),
workplace bullying alone (in the absence of exposure to job strain) and exposure to job
strain in combination with high bullying.
Next, we estimated the proportion of depression attributable to bullying and job strain
at a population level using Population Attributable Risk (PAR), a method for estimating
the proportion of a disease burden that could theoretically be eliminated by the removal
of a risk or causal factor (Rockhill, Newman, & Weinberg, 1998). PAR was calculated
using the following formula (Coughlin, Benichou, & Weed, 1994): PAR = (p * [OR 1]/
1 + p * [OR 1]) * 100, where p = exposure prevalence. As we included multiple,
mutually-exclusive work stressor exposure scenarios, the combined PAR was calculated

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as 1-(1-PAR1) (1-PAR2), with the PAR of each exposure scenario that reached
significance entered into the equation (Nurminen & Karjalainen, 2001).

Results
We tested and confirmed the underlying assumption of the link between job stressors and
productivity loss via depression. In relation to Hypothesis 1 that job strain and bullying
would be positively related to depression at Time 2, controlling for covariates and
baseline levels of depression, we found that relationship was significant, with the
unstandardized parameter B = .80, SE = .32, p < .05; Hypothesis 1 was supported (path
A). Hypothesis 2, that depression at Time 2 would be positively related to sickness
absence and performance loss at Time 2, after controlling for Time 1 covariates and job
strain and bullying at Time 1, B = .05, SE = .02, p < .001, was supported (note
this relationship was significant even after controlling for Time 1 depression, B = .039,
SE = .020, p < .05) (path B). The mediation Hypothesis 3 (A*B), that job strain and
bullying would be related to sickness absence and performance loss via depression was
supported with a 95% confidence interval, lower level = .09, upper level = .005 for the
estimated indirect effect of B = .0036.
Table 1 shows the average annual rates of sickness absence and performance loss by
depression severity and estimated costs. Compared to individuals without depression, the
cost of productivity loss due to sickness absence was nearly double for a person with mild
depression (from $AUD665 annually to $AUD1040) and nearly triple for a person with
moderate depression ($1616). The cost increased again for moderately severe depression,
but not for severe depression. Similar trends were seen for the performance loss costs of
depressed workers who were present at work, with each severity of depression greater
than that associated with non-depressed workers. Table 1 also shows that for workers with
just mild depression the estimated productivity loss cost total was $AUD1850 per annum,
compared with those participants without depression.
For workers with moderate depression, total costs as measured by performance loss
and sickness absence were $3870 greater (46% more) per annum, than workers with no
depression. On average, individual workers in every category of depression severity had
thousands of dollars more associated costs annually in productivity loss than workers
without depression.
Extrapolating these costs to the Australian national level, Table 2 shows the number
of respondents by depression severity, and the estimated corresponding equivalent
proportion of the Australian working population of 2009. The estimated annual financial
burden placed on businesses due to depressed workers totalled just under $AUD8 billion.
More than half of this is attributable to workers with mild depression. Although severely
depressed workers cost, on average, more per afflicted worker, extrapolating from our
findings it seems that they only represent a very small (0.62%) proportion of the
Australian workforce.
Table 3 shows the estimated ORs for job strain and workplace bullying on depression,
as well as the ORs and PARs for the three exposure scenarios. Despite bullying having
a much lower prevalence (6%), it was a much bigger predictor of new depression
(OR = 2.54) and therefore represented a larger contribution to the overall economic
burden. When exposure scenarios were used (to account for co-occurrence of job strain
and bullying as described), conditions of bullying alone, and job strain and bullying

Table 1. Individual annual productivity loss cost estimates attributable to depression (N = 2074).
Annual sickness
absence (hours)

Cost via
sickness
absence

Productivity
loss

Cost via
presenteeism

Combined
annual cost

None
Mild
Moderate
Moderately severe
Severe
Average

28.3
49.8
71.4
133.6
138.4
38.0

$665
$1040
$1616
$1990
$1355
$830

18.8%
22.7%
26.5%
22.9%
28.0%
20.3%

$7980
$9600
$11,225
$9715
$11,875
$8610

$8490
$10,340
$12,365
$11,125
$12,465
$9230

Adjusted*
sickness
absence cost

Adjusted*
performance
loss cost

Adjusted*
combined
cost

$0
$375
$950
$1325
$690

0
$1620
$3245
$1735
$3900

0
$1850
$3870
$2635
$3975

Work & Stress

Workers
depression severity

Notes: Costs are based on a national average annual income of $ASD42,380. *Adjusted rates show the amount of sickness absence and performance loss over rates of participants
without depression.

331

332

W.P. McTernan et al.

Table 2. Estimates of the costs of loss in national annual productivity attributable to the five
severity categories of depression for the Australian working population of 2009.
Workers
depression severity

Number (and %) of study

respondents

None
Mild
Moderate
Moderately Severe
Severe
Total

1892
675
167
32
17
2783

(67.9)
(24.3)
(6.0)
(1.2)
(0.6)
(100)

Proportion of working
population

Adjusted* annual
national cost

7,395,968
2,638,625
653,536
125,090
66,454
10,640,500

$0
$4,875,219,205
$2,530,625,690
$329,366,120
$264,134,255
$7,999,345,270

Notes: *Adjusted rates show the amount of sickness absence and performance loss over rates of participants
without depression. Costs are given in Australian dollars. The 2009 population was 21,875,000.

Table 3. Population-attributable risk calculations for job strain and bullying on depression.
Exposure condition
Job strain
Bullying
Job strain (without bullying)
Bullying (without job strain)
Job strain and bullying
Combined PAR

Prevalence
22.5%
5.9%
21.4%
3.2%
3.1%

OR (95% CI)
1.29
2.54
1.15
2.68
2.22

(1.001.67)*
(1.633.98)**
(0.881.51)
(1.454.95)**
(1.194.17)*

Annual depression cost attributable to job strain alone

Annual depression cost attributable to bullying alone
Annual depression cost attributable to job strain with bullying
Combined Cost

PAR

n/s
5.2%
3.7%
8.7%
n/s
$413,364,980
$294,551,780
$692,695,835

Notes: PAR = Population Attributable Risk. OR = Odds Ratio. Table shows PAR estimates controlling for
depression at Time 1, as well as age, gender and income at Time 2.
Job strain without bullying was excluded from the combined PAR because it did not reach significance.
*p < .05; **p < .001.

combined, yielded significance; however, exposure to job strain alone (with high bullying
cases removed) did not reach significance. Using the two significant PARs from the
exposure scenarios (see Table 3), the cost of new depression (emerging at Time 2)
attributable to job strain and workplace bullying combined was just under $AUD693
million.

Discussion
In this study we estimated the economic burden to employers of productivity loss (due to
sickness absence and presenteeism) by Australian workers with clinical and subclinical
depression at $AUD8 billion annually. We uncovered new evidence that workers with
even mild depression cost considerably more than non-depressed workers due to
productivity loss (through absenteeism and presenteeism), and that workers with mild
depression made up the bulk of the economic burden of depression.
Specifically, we showed an estimated 8.7% or $AUD690 million of the annual
depression burden of Australian workers was attributable to bullying and job strain. The
resulting estimated cost of depression to Australian employers due to stress-related

Work & Stress

333

absenteeism and presenteeism is comparable to the results of prior research (Medibank

Private, 2008) but in our study we specifically identified two possible causal agents, job
strain and bullying.
We proposed psychosocial safety climate as the guiding theoretical framework for this
study. According to this theory, psychosocial safety climate was proposed as a leading
cause of workplace risk factors such as job strain and bullying. We hypothesized and
found that these factors were significantly linked to depression, after controlling for
baseline levels of depression. Theoretically, the results support the important role of
these workplace psychosocial risks in the development of workplace depression. We also
proposed that depression would be related to sickness absence and presenteeism. Again
the results confirmed this. Finally, we found that job strain and bullying have an effect on
absence and presenteeism via depression. Our results support a theoretical process
interpretation whereby job strain and bullying are liable to lead to productivity loss
because of the depression they cause. Future research might consider that other emotional
responses such as anger or anxiety may mediate the job stressor productivity relationship.
A practical implication of the study is that the cost estimates generated in this study
provide essential information for making a business case to address depression in the
workplace generally, and for addressing work-related depression in particular. Moreover,
alleviation of work-related depression is feasible as well as required by Occupation
Health and Safety regulations in Australia and most other developed countries
(LaMontagne et al., 2008). Recent systematic reviews suggest that available strategies
for the prevention and control of psychosocial risks in the workplace are feasible and
effective (Bambra, Egan, Thomas, Petticrew, & Whitehead, 2007; Bambra et al., 2009;
Egan et al., 2007; LaMontagne, Keegel, Louie, Ostry, & Landsbergis, 2007). From a
preventative perspective, working to strengthen the psychosocial safety climate of
organizations should help to reduce the levels of bullying and job strain in the first
instance. Possibilities include: (1) increased social democratic leadership with a strong
commitment towards stress prevention, and ensuring participation and consultation
regarding work conditions and remedies; (2) increased communication at all levels
regarding risk factors; and (3) strengthened policies, practices and procedures for zero
bullying, and job redesign and matching the personnel of resources to demands in order to
reduce job strain (Dollard, Osborne, & Manning, 2012).

Limitations
There are several aspects of the present study that need to be considered when interpreting
the results. The PAR model in our analysis found an OR of 1.29 for depression at Time 2
from job strain at Time 1, controlling for depression at Time 1. This was lower than the
combined OR previously yielded by Stansfield and Candys (2006) meta-analysis of two
previous longitudinal studies (1.82), that was used to estimate PARs for depression due to
job strain in Australia by LaMontagne, Keegel, Vallance, Ostry, and Wolfe (2008). Our
lower OR may be due to the sampling technique or our measure of depression; however,
the OR we utilized was most appropriate in the present study, since it was derived from the
same population to which our PAR generalizations were ultimately made.
The measure that we used for bullying required a yes or no response, whereas the
effect may have differed if a measure that accounted severity and/or frequency was used.
Also the measure required respondents to self-label as being bullied. Other measures such

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W.P. McTernan et al.

as the Negative Acts Questionnaire-Revised (NAQ-R) (Einarsen, Hoel, & Notelaers,

2009) use a behavioural approach whereby respondents respond as to whether they have
experienced certain kinds of bullying behaviours. It has been argued that self-labelling
leads to an underestimation of the incidence of bullying compared to the behavioural
approach (Dick & Rayner, 2012). The effect of bullying on depression (OR = 2.54) may
therefore be stronger and costs due to bullying higher than our results suggest.
Alternatively, it has also been suggested that the behavioural approach and the selflabelling approach each capture different, but supplementary aspects of bullying and are
therefore both valid (Nielson, Matthieson, & Einarsen, 2010).
We noted that when conducting the separate exposure scenarios to account for
co-occurrence, job strain lost significance when occurring in the absence of bullying. As
we have argued, there is a common precursor to both job strain and bullying. Further, as
noted earlier there is evidence that high levels of job strain are associated with increased
workplace bullying (Tuckey et al., 2009). It is possible that high-strain work environments
contribute to workplace bullying, reducing the relationship between job strain and
depression when high bullying cases were removed. Therefore, our result should not be
interpreted as meaning that job strain was not important; rather that job strain and bullying
share similar variance in relation to depression. Indeed the results may suggest a further
process whereby bullying mediates the relationship between job strain and depression.
We examined job strain in combination instead of job demands and job control
separately. It has been argued that job demands may be a stronger predictor of depression
than job control (Smith & Bielecky, 2012). To investigate this possibility in our study, we
entered each variable separately but found diminished effect sizes and non-significance
(data not shown). In our sample, the combined effect of job demands and control seems
most important in predicting depression. Finally, we would argue that our estimates of
work-environment-attributable depression are conservative, as we have examined only
job strain and bullying, and there are other psychosocial working conditions that may also
elevate depression risk (e.g. job insecurity, long working hours, discrimination at work,
sexual harassment (LaMontagne et al., 2010).
It is important to acknowledge that there are other depression-associated cost burdens
that are not represented in this study. Our costs do not include indirect costs for employers
involved in replacing and re-skilling due to staff turnover, which are substantial costs
related to depression (LaMontagne et al., 2010), the need for greater supervision incurred
when staff experience stress, or reduced morale due to increased work pressure, or work
intensification (Australian Government Productivity Commission, 2010). Additionally,
there are other substantial costs not quantified in this study, including healthcare and
medication costs, as well as social costs to affected workers, their families and
communities (LaMontagne et al., 2010). Even though bullying was not considered as a
risk factor by LaMontagne et al. (2010), their costs were higher because of higher PAR,
and the range of costs that they considered, including turnover/staff replacement costs,
and societal costs (e.g. mental health-related service use, antidepressant medication), in
addition to the lost productivity time measures that we used.
Our research is conservative in relation to previous research as it considers workers
reports of depressive symptoms ranging from mild to severe in the past month, whereas
LaMontagne, Sanderson, and Cocker (2010) considered performance decrements for
those reporting any episode of major depression within the lifetime. Further, our
population-attributable risk of 8.7% was less than previous reports, possibly due to
our analysis method whereby we controlled for baseline levels of depression. Further, our

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335

all-cause total cost estimate of work-related recent depression for Australia of $AUD8
billion over one year was less than LaMontagne, Sanderson, and Cockers (2010) estimate
of $AUD12.6 billion annual cost of all-cause lifetime major depression for the same
population. Given that they did not estimate the impact of sub-clinical depression, and
that we found substantial costs of sub-clinical depression, their estimates of the overall
burden may be conservative.
Finally, in extrapolating costs to the national level, we assumed that the Western
Australia and New South Wales samples (representing two states out of the countrys
six states and two territories) were representative of the Australian national working
population. We believe this was reasonable as these two large states represent both the
newer and more historical aspects of the Australian economy and labour force, the newer
economy mining/mineral boom states (Western Australia and South Australia) and the
other six states and territories with more traditional mixed economies (represented by
New South Wales, the most populous state in the country).

Conclusion
In conclusion, grounded on a theoretical and empirically validated process, this study
identified the magnitude of the economic impact that workers with clinical and subclinical depression probably has on employers, and provides evidence to show how much
that burden could be reduced by improving the psychosocial work environment through
the prevention and control of bullying and job strain. We hope that the substantial costs
identified will help stimulate employers and other workplace stakeholders to implement
strategies to improve psychosocial safety climate and workplace mental health intervention generally, and to implement job stress prevention intervention in particular.

Acknowledgements
Findings in this paper are derived from the Australian Workplace Barometer (AWB) project, funded
by an Australian Research Council Discovery Grant DP087900.

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