Workers who find new jobs after being laid off are considerably worse off, and more should be done to help them, a new report has found.
The report said in the first year of changing jobs, wage losses reached 12 percent compared with those who kept their job. Photo: 123RF
The OECD paper, published today, said while they usually pick up work quickly, they tend to suffer a big drop in pay, working hours and job quality.
It also highlighted the lack of social assistance for those made redundant, with many people having to fend for themselves.
"We have the worst of both worlds. We get laid off in big numbers but we have an incredibly impoverished system of support for people," said Council of Trade Unions economist Bill Rosenberg.
The Minister of Workplace Relations and Safety, Michael Woodhouse, said officials had yet to digest the report, but the balance between a flexible labour market and a supportive safety net was about right.
"It's not surprising that some return to the workforce (with) perhaps less hours or incomes. That's a global trend.
"The question is can you Canute-like prevent that from occurring by mandating for something else to happen, and I'm not sure you can."
Wage losses hit those who find new work
Displaced workers who were made redundant in the last five years and had still not found a job accounted for about 1.1 percent - a little more than 29,000 people - of the total working-age population, the report said.
About 84 percent of those did find a new job within two years of being laid off, which is better than most OECD countries and comparable to Nordic countries.
But it did come at a greater cost for workers and their families compared with other nations.
In the first year of changing jobs, wage losses reached 12 percent compared with those who kept their job.
The wage effects were negligible in Germany and Britain while the losses were 6 percent in the United States and Portugal.
In the second and third year, the income loss was 20 percent.
"So people are getting worse pay, worse conditions and not very good quality jobs at all," Dr Rosenberg said.
Low skilled workers at risk
Low skilled workers are particularly at risk, the report said.
People with lower college education were twice as likely to be made redundant as people with a university degree, and those with no qualifications were three times higher.
Family and private providers were the main support for redundant workers, and the OECD said social assistance and public employment support were minimal and acted "very much as systems of last resort".
"The focus of the investment approach is reducing the dole queue and also making certain that young people leaving school have the skills and the attitudes they need to get into work and stay in work," Salvation Army senior social policy analyst Alan Johnson said.
"The investment approach hasn't ever really focused on displaced workers, particularly those in middle age."
Mr Woodhouse disagreed, pointing out that government agencies were working actively with Dunedin's community to find work for those who will lose their job when Cadbury's plant closes next year.
"The machinery is very much in place both in government and non-government for that to occur, even if they are displaced from smaller workplaces."
Mr Woodhouse conceded Work and Income could do more to inform redundant workers about the services available to them, such as Jobseeker support.
The OECD recommended expanding access to income support and training.
Employer responsibilities should also be strengthened, the report said, including introducing a minimum redundancy notice period for all workers.
Business New Zealand chief executive Kirk Hope said he would support that, but only in conjunction with a co-ordinated government approach on income support and training for those laid off.
"If a redundancy notice was given to a worker, that would trigger a whole lot of other things which included an integrated state support approach - what happens with welfare? What happens with additional training? So the support system was able to swing in behind that displaced worker."
Unions are also keen for employers to shoulder more of the burden.
Only half of workers laid off receive a redundancy cheque, with an average payment equal to around 34 weeks of wages.
The CTU wants redundancy to be compulsory.
Mr Hope said that would be a mistake, and hurt the very people it was meant to help.
"That looks like a tax to me.
"One thing that you would argue is that effectively that increases the cost to business and those costs can't be passed on to consumers then ultimately the most vulnerable workers end up suffering."
One idea that all sides rejected was the OECD's suggestion of introducing a mandatory redundancy insurance scheme.
"It gives an incentive to employers to lay people off at no cost," Dr Rosenberg said.
"I don't think I'd be convinced by mandatory redundancy insurance," Mr Woodhouse said.