One of the most palpable byproducts of the COVID-19 pandemic is stress. A recent Google search found more than 1.1 million references to stress in the news during the previous 24 hours. Teachers are leaving schools due to stress. Families are stressed about their children returning to schools. States are opening up COVID counseling lines. Countless articles document ways to reduce stress. There is even commentary on how to protect our pets from pandemic-related stress.
The American Psychological Association predicts the mental health consequences of this pandemic will be severe and long-lasting. Its stress polls show our anxiety skyrocketing. These record-high levels of stress are attributed to COVID-19 by nearly 8 in every 10 adults.
Not only will this elevated stress affect our minds and bodies, but there will be severe ramifications for our economy. Individual stress inhibits productivity, causing a shortfall that will stifle profits. As profits wane, companies will be left in precarious financial positions. Some will close their doors, causing job loss and increased uncertainty. Since uncertainty exacerbates stress, these dynamics are self-reinforcing. Stress, if left unaddressed, may cause our economy to settle into a much less desirable steady state post-COVID-19.
The stress-productivity shortfall is being fueled by turnover, absenteeism, disengagement, unhappiness, loss of innovation, decreased resilience and inability to focus at work (see the figure below). All these effects pose costs. In sum, these costs are the shortfall from potential productivity experienced by the firm.
Research across several disciplines allows us to quantify some of these effects and put a dollar value on the stress-productivity shortfall.
Turnover costs
Including search and training costs, loss of institutional knowledge, declines in productivity and lapses in innovation, estimates of annual turnover costs for a midsize company are as high as $7.5 million. A meta-analysis of turnover studies reports costs range from 5.8 percent to 213 percent of an employee’s salary. The median is 21 percent.
The average turnover rate is 18 percent. Stress causes 40 percent to 63 percent of that turnover. This means stress accounts for 7.2 percent to 11.3 percent of employees leaving their jobs annually.
The expected turnover cost attributable to stress is $251-$14,492 per employee annually. The stress-induced turnover cost for a $60,000-per-year employee is approximately $1,000 a year.
Direct productivity loss
Stress inhibits our focus. This impacts our work productivity. Even prior to the pandemic, a Gallup study found 55 percent of Americans are stressed most of the day. Stress negatively affects work productivity and relationships with co-workers and leads to being mentally “checked out” at work.
More than 20 percent of workers spend at least five on-the-clock hours weekly thinking about their stressors. Assuming a 40-hour work week and an annual salary of $60,000, this costs the company $1,500 per employee annually.
Happiness effect
Studies show there is a significant inverse relationship between stress and happiness. As stress increases, we become less happy. This relationship is important because happiness is linked to productivity.
A study at call centers in the U.K. found a causal link between happiness and productivity. They measured a 13 percent increase in productivity, measured by sales call volume and conversion to sales, when employees were happier. Another group of researchers conducted a randomized and controlled experiment and found higher levels of happiness increased productivity by 12 percent.
For employees who make $60,000 per year, the 12 percent loss due to stress-induced unhappiness costs $7,200 annually for each employee.
Engagement effect
As stress mounts, people disengage from their work and their companies. A recent study at a Chinese IT firm found that as employees thought about COVD-19 and their anxiety rose, their levels of engagement waned.
There is no shortage of research on engagement and what it costs firms. A 2013 Gallup study found lack of engagement at work costs the U.S. economy $450 billion to $550 billion each year. With a U.S. workforce of 164.6 million people, the expected loss per employee is $2,733 annually.
Expected absenteeism
One of the most salient ways stress can cause productivity declines is through absenteeism. The American Institute of Stress reports more than 275 million working days are lost annually due to stress. This is an underestimate because 15 percent of workers admit to lying when stress was the cause of their absence. For an employee who makes $60,000 a year, the cost of stress-related absenteeism is at least $870 annually but could be as high as $1,042 a year.
The stress productivity shortfall for an employee with a $60,000 salary is $13,400 annually. A company only has to have 375 employees for the productivity shortfall to cost them more than half a million dollars per year. For an average size company in the U.S., with 2,200 employees, the shortfall costs nearly $30 million annually.
So, what can organizations do to support their stressed workforce? Lorna Borenstein, founder and CEO of on-demand wellbeing solutions provider Grokker, shares some insights based on the results of Grokker Innovation Labs’ “2021 Working Americans’ State of Stress Report.”
