In a 2022 report, the WHO estimates that depression and anxiety cost the global economy $1 trillion annually in lost productivity. This speaks volumes on firms’ temporal bandwidth, where many prioritize short-term profits by overworking employees without realizing the long-term cost of burnout. Even through a theoretical perspective, investing in mental health seems to point towards a sustainable labor market.

If governments intervene through funding, the Non-Accelerating Inflation Rate of Unemployment (NAIRU) could be lowered, which is often elevated due to lower labor force participation from structural unemployment. This allows for higher employment without triggering inflation, as healthier workers would increase productivity without requiring additional wage pressure.

To reinforce these ideas, behavioral economics and nudge theory can be helpful for firms. Small yet effective changes in the workplace design itself, from increasing natural light exposure to incorporating mindfulness spaces, can improve cognitive performance. Additionally, tax incentives for firms that integrate initiatives, like deductions for providing Employee Assistance Programs (EAPs) or subsidizing therapy costs, could encourage widespread adoption and create a ripple effect.

Now, this all sounds promising, but is it even effective?

Studies show that every $1 spent on workplace mental health programs yields an average return of $4 in improved productivity and reduced absenteeism. Thus, we could say mental health investment has a positive fiscal multiplier, reducing long-term healthcare costs while enhancing productive efficiency. Sweden and Canada, for instance, have seen reforms contributing to a 3% increase in employment rates over the last decade, signifying notable increases in labor market participation and GDP growth.

Workplace mental health is not just a moral responsibility. Firms that recognize mental health as a labor market efficiency issue can both improve individual well-being and, as a result, drive macroeconomic growth. Investing in mental health isn’t just good ethics; it’s good economics.

References:

Chodavadia, Parth et al. “Prevalence and economic burden of depression and anxiety symptoms among Singaporean adults: results from a 2022 web panel.” BMC psychiatry vol. 23,1 104. 14 Feb. 2023, doi:10.1186/s12888-023-04581-7. Accessed 15 Feb. 2025.

“Employee Assistance Program (EAP).” United States Office of Personnel Management, www.opm.gov/frequently-asked-questions/work-life-faq/employee-assistance-program-eap/what-is-an-employee-assistance-program-eap/. Accessed 15 Feb. 2025.

OECD (2013), Mental Health and Work: Sweden, OECD Publishing.
http://dx.doi.org/10.1787/9789264188730-en. Accessed 15 Feb. 2025.

Pratap, Preethi et al. “Public Health Impacts of Underemployment and Unemployment in the United States: Exploring Perceptions, Gaps and Opportunities.” International journal of environmental research and public health vol. 18,19 10021. 23 Sep. 2021, doi:10.3390/ijerph181910021. Accessed 15 Feb. 2025.

“The ROI on Workforce Mental Health.” Uprise Health, 3 Sept. 2024, uprisehealth.com/resources/the-roi-on-workforce-mental-health/. Accessed 15 Feb. 2025.