>I've wondered if the frequency with which people are experiencing mental illness has increased, or if the rates have remained stable but diagnosis and reporting levels have improved.
Both although I'm very skeptical that diagnosing more people as mentally ill is the same as an improvement. The criteria to be diagnosed with a mental illness has loosened. Probably the most extreme example is the DSM-V declaring bereavement over 2 weeks to be a form of mental illness - depression. What has been considered normal human behavior for most of human history has been medicalized.
I've seen no evidence that increases in diagnosis in the last 2 decades have improved mental health in the developed world. Metrics like the suicide rate have gotten worse during that time. Self-reported anxiety and depression is on its way up.
This is not to say you cannot find individuals or groups helped. However the increase in labelling causes insecurity/stigma, while the field itself like all field does have some deadweight costs. The mental health field also, even if it effective are getting overwhelmed by broader societal issues.