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Julian Barling holds the Borden Chair of Leadership in the Queen's School of Business, and is the author of The Science of Leadership: Lessons from Research for Organizational Leaders.

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Traditional and social media scream bad economic news almost every day: The dollar is falling, oil prices have plummeted, the stock market is tumbling and Canada may now be in a recession. At the same time, uncertainty has increased, and no one can predict when oil will return to its former levels – indeed, whether it ever will. Few Canadians believe the economy will improve in the next 12 months.

As unsettling and harmful as all this is, it is nothing new. Most countries have seen darker economic times. But something has changed. In the past, the attention now accorded to bad economic news included equal attention to the numbers of people being unemployed, telling their personal stories and putting a face to their plight.

We can only speculate why this is no longer the case. Could it be that there is now a certain sense of schadenfreude – that the prerecession winners who were somewhat reluctant to share the spoils of their resources are now the clear losers, and the former losers might now stand to gain from a lower dollar? Or could it be that we now know from research over the past 85 years since the Great Depression that being unemployed has significant negative effects on people's social lives (isolation) and personal identity (negative stigmas), mental health (depression, anxiety, sleep problems) and physical well-being (smoking, alcohol use, cortisol levels)?

Moreover, the longer one is unemployed, the worse the effects. Recent studies suggest even more pervasive effects. For example, a large-scale study in Germany shows that one to four years of unemployment has negative effects on personality – a trend that was not reversed with re-employment.

As disturbing and enduring as the negative effects of unemployment are, many more people keep their jobs. Researchers are also now beginning to understand the psychological nature and consequences of recessions. Simply put, these times are replete with reminders about the uncertainty of our future. Can we hold on to our jobs? Are our pensions safe? Will the value of our houses decline? That feeling of uncertainty, and the loss of control over those issues that are most important to us, are two of the most destructive psychological stressors.

Recessions affect work. Job quality suffers, and work becomes more stressful. A large-scale survey in Britain showed that, while average hours worked declined only marginally, work intensification (working faster to cope with tighter deadlines) increased significantly during the Great Recession of 2008. At the same time, 40 per cent of employees reported seeing people laid off in their organizations, and most elements of a good job, such as promotional possibilities, the ability to influence work decisions and having the opportunity to learn new skills or even moving to a different employer, declined significantly. And people with bad jobs, the "dissatisfied employed," share similar levels of mental health as the unemployed.

An unstated assumption in this economic upheaval is that those who keep their jobs should just be grateful, and do whatever is necessary to ensure that their organization is moving forward. Research, however, points in the opposite direction. Employees who are most afraid of losing their jobs exert less effort in their work, and the greater their financial insecurity, the greater this effect. Clearly, when people have things to worry about other than work, they do so.

But what of the personal effects of working during a recession? Is it enough to drive people to drink? The analysis of Michael Frone – a senior research scientist in social/organizational psychology at the University of Buffalo – of more than 2,500 working managers in the United States begins to provide an answer.

While the number of respondents who drank alcohol did not increase over all during the Great Recession in the United States, it did among middle-aged employees, for whom the stress of family and financial responsibilities might have been a contributing factor. The frequency of heavy drinking (i.e. five or more drinks a day and intoxication) increased for all demographic groups. The amount of alcohol consumed at work decreased as well, perhaps due to increased work load and more performance monitoring. However, the amount of alcohol consumed in the two hours immediately after work increased significantly.

The negative effects of a recession do not stop at employees – research has shown a trickle-down effect to other family members. Our own research has shown that, when parents are concerned about whether they will be able to hold on to their jobs – even in cases where they managed to do so – their adolescent children were aware of their parents' insecurity, which affected them negatively. These children showed poorer work beliefs and attitudes, and their school performance suffered. Younger children are affected, too. Data collected during the Finnish recession of 1994 showed that, by hurting parents' mental health and marital interactions, financial insecurity and economic hardship indirectly affected their young children's externalizing behaviours (i.e. oppositional behaviours, disobedience). Similar effects have been seen in different countries, with boys and girls as young as 24 months.

Spare a thought for organizational leaders through this turmoil. During times of significant organizational upheaval, we generally concern ourselves with employees' mental health, and expect our leaders to safely steer the organization toward better times. But leaders themselves are not immune to any of the stressors that their employees would endure, and they have their own unique set of stressors to deal with. Executing layoffs and the general feeling of helplessness that comes from managing a situation over which they have little control, will exert its own toll.

Getting organizations and their employees through these troubled times unscathed requires that even as budgets shrink because of the recession, we pay more attention to the mental-health needs of all those in the organization – including, and perhaps especially, organizational leaders.

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