April 08, 2026
Employee Engagement is Sliding and Productivity is Paying the Price
When the job market is strong, disengaged employees leave. When it tightens, they stay and show up checked out, delivering less. That double bind is the central warning in Gallup’s newly published analysis of its State of the Global Workplace 2026 Report, which finds that global employee engagement has now fallen for two consecutive years and sits at its lowest level since 2020.
Gallup estimates that each percentage point of lost engagement represents approximately 21 million fewer engaged employees worldwide. Last year, the cumulative drag of disengagement cost the global economy around $10 trillion in lost productivity, equivalent to nine per cent of GDP. For leaders who have treated engagement as a people-function concern rather than a strategic one that figure may raise alarm bells, particularly given the current financial climate amplifying the impact on employee work.
The Decline That Keeps Compounding
Global engagement peaked in 2022 and 2023 and has been retreating since. South Asia recorded the steepest fall in 2025, down five percentage points, but the breadth of the decline is as notable as the depth: every region moved in the same direction. Gallup frames the consequences in terms of organisational resilience as much as productivity. Detached employees are harder to mobilise through disruption, whether through restructure, new technology or shifts in customer expectations.
Why Managers are the Key
Managers have historically been more engaged than the people they lead, a pattern Gallup calls an “engagement premium.” That premium is disappearing. Lower manager engagement now accounts for much of the overall decline since 2023. In South Asia alone, manager engagement fell eight percentage points in 2025, the largest regional drop of any group, which Gallup links in part to organisational flattening. As businesses cut management layers and surviving managers inherit larger teams, Gallup’s research on span of control suggests that wider team sizes correlate with lower manager engagement. Gallup warns that flattening should not be treated as a headcount exercise.
The implications for AI adoption are direct. A separate Gallup US workforce survey conducted in Q1 2026 found that the strongest predictor of whether employees use AI in their day-to-day work, setting aside the technical integration of the tools, is whether their direct manager actively champions it. Organisations investing heavily in AI capability while their managers are disengaged may find those investments underperform. This connects to a pattern Gallup identified in earlier research: accountability, defined as holding teams to clear expectations, is the leadership competency rated weakest by both leaders and managers, and the one most directly tied to engagement outcomes. Disengaged managers struggling to hold their teams accountable are poorly placed to lead AI-era change.
A Cooling Job Market
Overall, Gallup found that perceptions improved slightly in 2025, but entirely on the back of non-remote-capable, fully on-site workers, who grew two points more optimistic. Fully remote workers, however, fell five points. Remote-capable employees who are working fully on-site and may be navigating return-to-office pressure, fell 14 points. Gallup attributes the drop to changed employer policies and the automation of knowledge work.
For US and Canadian workers, the trajectory is sharper still. Job market optimism in that region fell ten percentage points in 2025, and the US/Canada now sits second-to-last globally, down 23 points since 2019. The US added 181,000 jobs in 2025, against 1.5 million the previous year. Gallup notes that US business media described a “no hire, no fire” climate for most of the year. Australia and New Zealand recorded an even steeper fall of 12 points, reversing a run of post-pandemic optimism.
AI anxiety is a compounding factor. Gallup’s Q1 2026 US survey found that 18 per cent of employees now consider it somewhat or very likely that their job will be eliminated within five years due to automation or AI, up from 15 per cent in prior surveys. Where AI has already been implemented, the figure rises to 23 per cent. In finance, insurance and technology, nearly a third of employees hold this view.
Unfortunately for business leaders, while disengaged workers tend not to leave when market conditions are tighter, the consequences show up in reduced effort and output in their work.
Where Leaders Go From Here
Gallup reassures that global trends are not destiny. Some organisations achieve manager engagement at four times the global average. The difference, Gallup argues, lies in how seriously leadership treats manager selection, development and ongoing support. They determine whether frontline managers advocate for change, whether AI tools are adopted and whether service quality holds under pressure.
An essential starting point is clarity. Employees who do not understand what is expected of them cannot be engaged in the ways which matter. Building the conditions for engagement requires listening consistently, acting on what is heard, and ensuring managers have both the skills and the support to do the same. The companies that begin rebuilding engagement now will be the only ones ready for whatever the job market does next.
