Lay-offs have become standard business practice. Here’s why that’s a really bad idea – for everyone

Lay-offs were once a rare event in the United States. But in recent decades, they’ve become standard practice as worker and union power declined and as companies began laser focusing on short-term profits for shareholder returns by squeezing labor costs, rather than on long-term innovation, sustainability, stakeholders and human capital.

But a raft of research has found that being unemployed is really bad, particularly in our work-focused culture, where so much of our sense of identity and value comes from our jobs and the money we earn from them. And because not only has the “social contract” between employers and employees broken down, but so, too, has the safety net that was originally designed during the Great Depression to help workers weather a downturn and bounce back to a new and perhaps better job, financial stability and good health and wellbeing.

And those broken contracts with workers could cause even more damage to humans as automation continues to rapidly change work, and we begin to prepare for a future where there may be less work, or less stable work, and more bouts of unemployment.

Here’s what we know: Being laid off more than doubles the risk of heart attack and stroke among older workers, can increase the chance of developing stress-related diabetes, arthritis or mental health issues by 83 percent, and even shorten life expectancy. Losing a job also often means losing access to health care in the U.S. Unemployment is also linked to a higher risk of suicide.

But even anticipating being unemployed can be a major stressor, said Sarah Damaske, a sociologist at Penn State who we feature on this week’s podcast episode and whose most recent book, The Tolls of Uncertainty, explores the unemployment experience. “Just the thought of being unemployed stresses people out,” Damaske said. “And once you are unemployed, it really isn’t good for your health.” First, there’s the financial shock. Each state has developed its own unemployment insurance system. In some states, about 60 percent of those unemployed will qualify for unemployment insurance. In others, it’s as little as 10 percent. Some states reimburse as much as 50 percent of what the unemployed worker had been making, in others it’s as little as 25 percent – neither of which helps a low-wage worker much.

"Then comes the physical and mental health costs,” Damaske continued. Shame. "Feeling a loss of identity, or that what you do matters. Being unemployed can have a negative affect your health for years and years, and sometimes decades to come."

In her study of unemployed people in Pennsylvania, Damaske has also found important – and troubling – differences in the way men and women respond differently to unemployment. Unemployment is less common for women, she said, and is often a bigger shock to the system. “Losing a job was something they felt deep guilt about, and that they wanted to apologize to their families for,” she said. “And the way that they talked about apologizing to their families was through sacrifice.” Men, too, wanted to make the job loss up to their families, but, to them, that meant they prioritized searching for work. But women prioritized doing more at home, and sacrificing their own needs, even their own health. Damaske found women who stopped taking medication, or going to the doctor, even for heart conditions and high cholesterol. She found unemployed women who were neighbors and began sharing asthma inhalers. 

“Asthma inhalers are very, very expensive without insurance,” Damaske said. “So even for women who reported that they had more than enough to pay their bills, they said, ‘Well, if it means that my kids can have a little more and won’t have to go without anything because I lost my job.’

“That was significant to me – that it was their health that they were all choosing to give up,” she continued. “That their health could be put on the line and was the place they decided to make the sacrifice.”

But what if it didn’t have to be that way? In the first podcast episode, MIT economist David Autor talked about how other peer competitive economies have unemployment systems that work much better – more people qualify, the pay outs are higher and last for longer and there’s training and help for getting people back into the labor market. Experts have put together a blueprint for updating and federalizing an unemployment system for another era that is now nearly a century old. And JP Morgan Chase analyzed the experience with the temporarily increased unemployment benefits during the pandemic and found that not only were more workers helped who, under the current system, aren’t – including the self-employed and gig workers – but that, contrary to what many conservatives argued, having a decent unemployment insurance system did not dissuade people from seeking employment.

On this week’s podcast, we feature Damaske and Dorian Warren, co-president of Community Change and two workers. The system didn’t work for Kiarica Schields, a hospice nurse and single mother of 5 in Georgia, and, without childcare, she couldn’t find work, and without work and when unemployment ran out, she couldn’t pay her bills. She and her children were evicted, her car was repossessed, and she found herself struggling to survive. Warren said her story was sadly too familiar.

But the system did work for Mark Attico, who worked in business travel and was furloughed early in the pandemic. He received unemployment benefits without delay or hassle. The pandemic boost of $600 per week helped him cover his bills and gave him time, not only to look for the right next job, but also to reconnect with and grow close to his middle-school son. Stories like Attico’s give Warren hope that we can change. That we can make the now and future of work and wellbeing better for everyone.

“If billionaires can go to space, certainly we can figure out how to redesign work so that everybody has access to good work, to meaningful work, to well-paid work, as well as the leisure time that everyone deserves. We can figure this out. It’s not for lack of imagination. It’s just that some folks benefit from the current system as it’s designed versus others. And the vast majority of folks in this country are not benefiting from how we’ve designed our economy. So we can, we can redesign it in a way in which it’s not a zero sum, in which everybody can benefit and live a good life of flourishing and well-being. We can do that if we wanted to,” Warren said.

Attico’s story “gives me so much hope for the future,” he continued. “And can we imagine, can we close our eyes and just think about millions of people bouncing upward to the collective benefit of all of us. That is achievable. But we have to do the work to make it possible.”

Next week, on the last episode of our 10-episode season on work stress and the future of work and wellbeing, we explore the role that government – and business – can and should play, with Rep. Jim Himes of Connecticut, chair of the U.S. House of Representatives Committee on Economic Disparity and Fairness and Growth, Zeynep Ton, MIT professor and founder of the Good Jobs Institute, and Warren Valdmanis, a private equity investor with Two Sigma Impact, which only invests in companies that create good jobs that are “big enough” to support workers at work and to have time for life and care at home.

REP. JIM HIMES: Lincoln said it. Public sentiment is everything, and public sentiment is very, very much on the side of doing better by our most marginalized people.
BRIGID SCHULTE: We’ve got work to do. I hope you’ll join us next time on Better Life Lab.

The Better Life Lab podcast—Finding a Better Way to Work and Live—is a co-production of New America and Slate and sponsored by the Robert Wood Johnson Foundation. You can find the podcast – and transcripts and additional resources – on our Better Life Lab website, on Slate, Apple, or wherever you get your podcasts. Leave a review on Apple podcasts if you like the show. And email me with ideas and stories: schulte@newamerica.org.