29 May 2017

Laid-off workers suffer effects for years - study

5:04 pm on 29 May 2017

Workers made redundant suffer lasting effects on their employment and income prospects, even with government support, a study has found.

A young woman - sad or upset - sits on a bench with her head in her hands.

Photo: 123RF

Motu Economic and Public Policy Research Trust tracked those made redundant in New Zealand between 2001 and 2010.

It found their chances of finding work were 20-25 percent lower after the first year, compared with those who had not stopped working - and while their prospects improved over time, the rate was still 8-12 percent lower five years later.

The results for income levels were similar.

The earnings of the workers made redundant were 25-30 percent lower than their counterparts in the first year, and 13-22 percent lower after five years.

One of the authors, Dean Hyslop of Motu, said those who had been in the workforce for a while were likely to find it harder to get back on their feet.

"They've more likely than not to have built up specific human capital and skills associated with their job.

"Losing that makes it difficult for them to find other work," Dr Hyslop said. "Even if they find work they're unlikely to be finding work that they have the skills to be compensated for."

The impact was worse for workers who lost jobs during the financial crisis from 2008.

"The employment effect for workers who lost their jobs in the global financial crisis was 3-4 percentage points worse than for those who became displaced before then," Dr Hyslop said.

Government benefits provided some support for laid-off workers, but Dr Hyslop said the shortfall was still substantial.

"Workers who lost their jobs in the previous year received benefits 6-11 percent more often than comparable workers, and 3-4 percent more often after five years," said Dr Hyslop.

"However, despite such income support, displaced workers' total individual income was about 30 percent lower than comparable workers during the first year after displacement, and about 20 percent lower after five years."

Dr Hyslop said retraining programmes could make a difference for those laid off, and income insurance could be an option for some.

In April, an OECD study reported New Zealand workers who found new jobs after being laid off were considerably worse off than their peers, and more should be done to help them.