Economic, Social, and Psychological Impacts

Lay-offs and Unemployment

Due to government-imposed lockdowns and travel restrictions, some industries such as
entertainment, sports, hospitality and travel were forced to shut down operations, leading to
massive employee lay-offs and their associated increment in unemployment rates. This is
while empirical evidence suggests that along with loss of income, being unemployed may
bring about a host of stress related consequences upon an individual, including physical
ailments, anxiety, and depression (Kehr, 2004). The adverse psychological impacts of
unemployment can be explained by Jahoda’s deprivation model that suggests that
employment provides an individual with both manifest benefits -such as income-and other
latent benefits including activity/occupation, social status, social contacts, time structure, and
satisfaction of sharing common goals with others. Also, according to Lee (2021), an
individual can particularly be devastated by financial deprivation resultant from losing
employment, thus triggering a series of psychological problems that can affect the entire
family.

Coupled with the adverse impacts of unemployment on laid-off individuals are the negative
spill-over effects of lay-offs on surviving employees. Research findings have established that
organizations that reduce their overall staffing level tend to be confronted by corresponding
increased stress, lower levels of job involvement, and organizational commitment among
surviving employees (Ozcelik & Barsade, 2018). Moreover, it is apparent from research that
the performance difficulties faced by organizations due to overall reduction in staffing levels
are comparable to those resulting from voluntary employee turnover. This speaks to the fact
that the massive layoffs resultant from economic downturns tend to drive surviving
employees into zero-sum mindsets whereby individuals become increasingly prone to
perceiving others as competitors while such may not be the case. Thus, organizational and
government policies on massive employee lay-offs ought to consider both economic
consequences of unemployment on affected employees, along with the psychological and
performance impacts on those who remain working, the trigger event (such as pandemics,
among others) notwithstanding.