Poor mental health costs Canada’s economy an estimated $180 billion (CAD) per year. And more than half of that cost is borne by employers.
That’s according to a new report published by the Canadian Standards Association (CSA) in collaboration with Heal-3 and Institute for Work & Health (IWH).
The report found that disability claims, group benefits, wage replacement, accommodations and insurance premiums were estimated to cost $106 billion dollars a year. Productivity losses due to mental illness add an extra $17 billion to that estimate.
The other $70 billion is attributed to medical costs, individual out-of-pocket costs for treatment, and non-medical costs including homelessness supports, police and crisis response, and court processes and correctional services related to mental health.
The authors make it clear that much of these costs are reactive rather than preventive.
“Our analysis shows that most costs related to mental illness and poor mental health in Canada are spent responding to symptoms and downstream consequences, including those due to delays in accessing care,” says IWH Associate Scientist Dr. Kathleen Dobson, a report co-author, and project lead on estimating the indirect productivity costs.
“Treating mental illness symptoms when they arise is essential, but reducing the $180 billion burden will likely require shifting more attention to prevention activities and improving early access to mental health services.”
The last time a national cost estimate of mental illness was conducted was in 2011, when the cost was placed at $50 billion—or $67 billion in today’s dollars. At the current pace, the report says the cost of mental health is expected to be $600 billion by 2050.
“Over the past 15 years, we’ve made progress in recognizing the need to support worker mental health both in and outside the workplace,” says Dobson. “However, gaps in addressing upstream factors continue to shift the costs to workers and employers.”
How do mental health challenges impact workers and employers?
About 18 per cent of Canadians aged 15 or older had a diagnosable mood, anxiety or substance use disorder in 2022, according to Statistics Canada’s Mental Health and Access to Care Survey. The prevalence of each disorder had doubled or nearly doubled since 2012, when the last round of that survey was conducted.
IWH research led by Dobson has shown that, as many mental health challenges start in young adulthood, they can impact a workers’ future earnings and years of employment over their life. In the CSA report, the authors note that workplace conditions and psychosocial hazards can impact workers’ mental health and performance—a link they say should not be ignored.
In addition to the costs to workers, mental health challenges can cost employers in several ways, according to this report.
Of the $106 billion estimate borne by employers (including costs to the workers’ compensation system which is funded by employers), much is attributed to rising disability and psychological injury claims. These claims can be long and costly, lasting up to 400 days and ranging from $15,000 to $50,000, according to estimates cited in the report. That’s more than five times longer and more expensive than average physical injury claims.
Presenteeism a major economic loss for employers
To reach the estimate of $17 billion in loss of productivity, Dobson analyzed the economic costs of depression, bipolar disorder, anxiety disorders, and substance use—the most common mental illnesses among working-aged Canadians.
These costs include:
- presenteeism ($12.5 billion): the value of lost productivity when workers go to work, but are less productive due to their mental health condition;
- absenteeism ($2.88 billion): the lost income to society when people miss workdays due to their condition;
- unemployment ($1.7 billion): the lost income to society when people are not able to work due to their condition; and
- premature death ($0.01 billion/$10 million): the lost income to society when workers die before retirement age due to mental illness.
“Presenteeism accounts for almost 80 per cent of productivity losses,” notes Dobson. “In other words, most of these economic costs are linked to people being present at work but not operating at full capacity due to poor mental health.”
Proactive mental health spending may cut costs
The report sets out a number of recommendations to shift focus and spending upstream to preventative measures, rather than rely on reactive responses. Among these, the authors note the need to address the role workplaces have in reducing the psychosocial risks—such as high workloads, interpersonal conflicts, low job control, and trauma exposure—that can lead to or exacerbate psychological injuries.
And as only a small portion of employers’ costs go toward prevention, the report also suggests incentivizing employers to invest more in these measures through policy approaches. Examples include:
- creating tax credits and grants for employers that spend on mental health support;
- providing subsidies for employers to offset the costs of mental health disability leaves or return-to-work processes; and
- integrating psychological health and safety practices into occupational health and safety legislation.
“Improving the mental health of workers and the psychosocial conditions of their workplaces is essential not only to reduce these costs, but also to help support workers with mental illness to be able to use their skills and experience to fully contribute to their work, workplaces, and Canada’s economy,” says Dobson.