Losing your job can be a blow, but new research shows the negative effects may drag on for years. Shane Cowlishaw reports.
Whether you’re made redundant or fired, suddenly finding yourself without work is a serious problem for most.
Alongside the immediate loss of income and the worry of how to pay the bills, there is the associated loss of esteem and self-worth that many struggle with when finding themselves unemployed.
Economic think-tank Motu has looked at the impact of losing your job and found that for many, the negatives continued long after the initial shock.
The analysis, funded by the Ministry of Business, Innovation and Employment, used data from the Survey of Family, Income and Employment to identify those who reported an involuntary job loss.
It was then matched with data from Statistics New Zealand’s Integrated Data Infrastructure and focused on workers who had been employed for at least one year before losing their position.
Unsurprisingly, it found there were severe immediate impacts in the year following a job loss, with the group having 20-25 percent lower employment rates to those who kept their jobs.
They were also earning about 25 percent less on average after the first year.
The longer-term trends were more startling.
Five years after a job loss, the employment rate of the group that had involuntarily lost work remained around 10 percent lower and people were earning 15 percent less.
Welfare and income support levels were also higher amongst the group after five years, and it was older workers that were affected the most.
For workers under 30 there were almost no long-term effects after losing their job, but those over 50 had 11 percent lower employment and earned 25 percent less than their old job five years later.
Dean Hyslop, lead author on the research, said this illustrated the difficulties of finding a new job toward the end of your career, but also the fact that some people may choose to work less after losing their job at an older age.
“It's sort of consistent with, if you’re an older worker, you’ve built up a fair amount of what we call in economics 'industry-specific human capital', and if you lose your job you lose all of that and that has true long-term effects, it makes it harder to get work full-stop and if you’re lucky enough to get work you’re not going to be getting the same earnings.”
The findings echo those in an OECD report released earlier this year.
It found just over one percent of working age people who had been made redundant in the past five years had still not found a job, a rate lower than in the 1990s but higher than ten years ago.
Many of those who had found work earned less, worked shorter hours, and had fewer benefits than before.
Low-skilled workers were particularly vulnerable, with those with lower secondary education twice as likely to be made redundant.
The report recommended that New Zealand introduce a minimum statutory notice period for laid-off workers and create an active redundancy insurance scheme that replaced voluntary redundancy repayments.
Stephen Blumenfeld, director of Victoria University’s Centre for Labour, Employment, and Work, said the key to lessening the impact of job loss was training.
“Technological change is happening at a lot faster pace now than ever before and what happens to people who are unemployed whose positions are made redundant, they’re not getting whatever training people who are still in the workforce are receiving, paid for by the employer, so it falls to them to upskill but they’re not in a financial position to afford it.”
A training programme for people made redundant to teach them more valuable skills would benefit the country as it would keep productivity growing, he said.
Blumenfeld was also in favour of a compulsory unemployment insurance scheme like in the United States.
This involved employers paying the premiums that were tied to the company’s track history with unemployment, giving them the incentive to keep workers and provide them with training.
It was better than voluntary income protection insurance paid for by workers as those on low incomes could not afford it.
“The thing is, employees who tend to pay into that sort of system are not the ones who are likely to lose their jobs.”