Could improving workplace mental health help solve Australia’s productivity puzzle?

There are growing calls for governments and employers to pull all possible levers to address Australia’s productivity crisis. 

One contributor to the crisis that has received less attention is the lingering mental health impact of the COVID-19 pandemic, and how to address it.

In Australia, rising labour productivity has contributed around 70 per cent of the growth in real gross national income over the past 30 years. 

But the Productivity Commission (PC) says productivity is growing at its slowest pace in 60 years and the National Accounts show labour productivity has gone backwards since March 2022. 

Meanwhile, separate PC figures show poor workplace mental health costs the Australian economy between $12.2 billion to $39.9 billion each year in lost productivity and participation. 

Workers have been feeling overworked and burnt out in the aftermath of the pandemic. Australian workers appear to have suffered more than others. 

In the 2022 Microsoft Work Trend Index, 62 per cent of Australian workers reported being burnt out at work, compared to 48 per cent of workers globally. This year, the Australian WHS Survey found nearly two-thirds of workers were feeling burnt out.

Mental illness and poor mental health lead to lower rates of workplace participation, more absenteeism and greater presenteeism, where staff attend work but are less productive. 

Australia’s tight labour market has left businesses running on empty and employees overworked. Unmanageable workloads reduce mental health and increase burnout. Employees become less productive and have less capacity to innovate, further entrenching lower productivity growth. 

Improving job design

So what can be done?

A good first step is to ensure that roles within an organisation are well-designed. Unsurprisingly, jobs with high physical, emotional or cognitive demands tend to have higher levels of mental-health risk and increased levels of sick leave taken. 

Conversely, there is strong evidence that good job design promotes positive mental health outcomes in the workplace through enhanced employee wellbeing and productivity levels. It varies by role and industry, but usually includes higher levels of autonomy, social support, strong feedback systems and job demands that match the skills and resources of the employee.

Research shows that the most successful job redesign includes each employee in the process, and that it is never too late to redesign and improve roles in ways that both increase productivity and reduce strain on employees.

Another element of job design that has become increasingly prominent since the pandemic is flexibility. Flexible work arrangements are high on the list when it comes to staff attraction and retention. Yet there is an emerging tension between employees wanting to work flexibly and employers increasingly pushing for a return to the office. 

This feeds directly into workers’ mental wellbeing. The PC has identified that jobs with little control or autonomy in decision making, an imbalance between effort and reward, and where there is a lower level of perceived fairness within the workplace, are key risk factors for poor workplace mental health.

The productivity impacts of remote working remain unclear. Some research suggests that hybrid working – a combination of time spent in the office and working at home or elsewhere – has a small positive impact on productivity. The hybrid model has seen reduced employee turnover, and employees using the time they used to spend commuting on work and other activities. 

What is clear is that good management is critical.

CEDA research has previously found that employers with better management capabilities had significantly better employee-related outcomes on a range of measures in the wake of the pandemic.

Skilled managers can work with employees to build a model of hybrid work that supports the mental health of employees, while also achieving the productivity required by their employers.

Good managers recognise that hybrid working is not just about mandating a number of days that employees must be in the office. It is about striking the right balance between collaboration and concentration, and between work life and life outside of work. 

For example, research shows that good management is the difference between positive or negative productivity outcomes when employees work exclusively remotely.

More broadly, empathetic managers are vital to workplace wellbeing. The Black Dog Institute identifies management capability as one of the most influential contributors to improving mental health outcomes for employees. 

Supporting workplace mental health is no longer just a health outcome. It is a sound business decision. 

Without change, Australia’s lacklustre productivity growth and lack of innovation will continue to weigh on living standards.

This is an outcome we cannot afford. Better managers might just be the answer.