Why mental health battles are driving young Aussies out of work

Just a decade or two into their careers, more younger Australians appear to be exiting the workforce. Sometimes temporarily, but in other cases, for good.

That's one of the major takeaways from a report put out by KPMG and the Council of Australian Life Insurers last year that used life insurance data to examine the intersection between health and work.

The report revealed that between 2013 and 2022, there was a 732% increase in the number of total and permanent disability (TPD) insurance claims made by workers aged between 30 and 40. 
The cause? Mental health issues.

"Claims for permanent disability due to mental ill health have exploded," says Christine Cupitt, chief executive of the Council of Australian Life Insurers.

"If you look at our report, 80% of the increase in TPD claims in the past 10 years has been due to claims for mental ill health.

"We've seen the average age of a TPD claim for mental ill health fall from about 49 to 46. So more people are leaving the workforce and they're doing so at an increasingly younger age."

What is causing the spike in poor mental health?

From the cost of living and future housing prospects to climate change and loneliness, Greg Jennings, chief engagement officer at Beyond Blue, says that young Australians are facing unprecedented levels of psychological distress due to myriad issues.

"The rate of mental health conditions in young people is rising at a concerning rate - an almost 50% increase in the past 15 years. This is in contrast to otherwise relatively stable rates for other ages in the general population.

"Beyond Blue's latest Australia's Mental Health and Wellbeing Check report found that younger adults aged 18 to 34 are significantly more likely to experience mental health challenges - such as anxiety and depression - with greater severity than the general population."

That's at a broader level, but Jennings says that the situation in the workplace is also concerning, with many younger workers being driven to exhaustion by excessive workloads and limited support.

"Our recent national poll found that half of Australian workers are currently experiencing burnout, with the highest rates among those aged 18 to 29."

Multifaceted costs 

Employment and workplaces can be a double-edged sword when it comes to an individual's mental health, Jennings explains.

"When work is meaningful and well-designed, it can support mental health by fostering confidence, financial security and a sense of belonging.

"But when workplaces are characterised by chronic stress, bullying or exclusion, they can become sources of psychological harm, contributing to anxiety, burnout and even trauma."

Whatever the underlying cause, it goes without saying that mental health issues that affect people's ability to work can have significant impacts for individuals and for society as a whole.

"If these challenges persist and lead to unemployment, the risks escalate. Unemployment is a well-established risk factor for mental ill-health and suicidality," says Jennings.

Then there's the financial cost. That's not just the implications that come with losing an income, but the long-term impact on someone's ability to save, invest or contribute towards superannuation.

"There's also the productivity impact and the $220 billion drain on the economy each year due to mental ill health," says Cupitt.

"What we're seeing is increasing numbers of people who are leaving the workforce for good and not participating as fully in the economy as they would want to."

Safety net

Debt and ongoing expenses don't simply go away, so the financial cost of being forced to stop working can be huge.

Life insurances such as TPD can provide a financial safety net of sorts in situations where people can no longer work as a result of illness or injury.

The inclusion of mental ill-health differs between policies and insurers.

Income protection insurance, for instance, is designed to pay out a percentage of someone's pre-illness income on a monthly basis for a set period of time or until a certain age.

TPD insurance, on the other hand, provides a one-off payment to people who are injured or disabled to the degree that they won't be able to return to work.

What some Australians may not appreciate is that they could already be paying for life insurance, such as TPD cover and income protection (though this is less common), through their superannuation.

Beyond super, it's also possible to take out insurance directly with an insurer or via a financial adviser or insurance broker. In some cases, employers even provide TPD and income protection as an additional benefit to their employees.

Cupitt says the life insurance industry paid $4.2 billion in TPD payments alone last year - payments which, she argues, can prove crucial to those who are no longer able to work.

"They can be the difference between being able to stay in their home or needing to move, or keeping their kids in the school they are used to."

Need to talk?

• Beyond Blue (1300 22 4636)
• Lifeline (13 11 14)
• The Kids Helpline (1800 55 1800)

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