Redundant workers impacted for years after job loss

People who get made redundant face tougher times for years after, new research shows. Photo/123RF.

People who lose their jobs through redundancy face lower pay and find it harder to get another job for years after, new research has revealed.

Public policy think-tank Motu Economic and Public Policy Research Trust found people who were hit by an involuntary job loss had a 20 to 25 per cent lower employment rate the year after - and a 10 per cent lower employment rate five years later.

Their earnings were also about 25 per cent lower in the first year of their new job and remained 15 per cent lower five years later.

Dean Hyslop, senior fellow at Motu Economic and Public Policy Research and lead author on the study, said his research showed involuntary redundancy had a large and lasting negative impact on workers' subsequent employment and earnings.

"Although employment rates improved gradually, five years later their employment rate remained around 10 per cent lower than comparable workers."

Hyslop said while government income support partly helped, total incomes of workers who lost their jobs remained substantially lower than those who did not.

The impacts were even worse for those who lost their jobs during the recession from 2008.

"The employment effects 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," he said.

Workers who lost their job during also saw a bigger hit on their incomes despite being more likely to be on a government benefit.

Hyslop said those who lost their job were 6-11 per cent more likely to receive a benefit the year after and 3 to 4 per cent more likely to after five years.

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

Older workers were also more impacted by redundancy in the long term.

"Even though workers under 30 experience a sizeable employment loss in their first-year after losing their job, the longer term effects of displacement are negligible."

"In contrast, on average displaced workers over 50 have about 30 per cent lower employment in the first year, and 11 per cent lower employment after five years," he said.

The analysis was based on the Survey of Family Income and Employment sample of workers over the period 2001-10, which was then matched to administrative employment and earnings data from Statistics New Zealand's Integrated Data Infrastructure (IDI) covering the period 1999-2015.

The analysis focused on workers who had been employed for at least one year before their job displacement.