Australia has a high rate of firing workers when companies downsize compared with many other developed nations, a new report has found.
And while 70 per cent of workers who are laid off find a new job within a year, one in three will be paid less than they were in their old jobs. One in eight move into jobs that require a lower set of skills.
The new report by economist Ann Vourc'h for the Organisation for Economic Co-operation and Development found that each year around 2.3 per cent of Australian workers lose their jobs as a result of corporate downsizing or closure.
Of those who lose their jobs, 70 per cent find a new one within a year and 80 per cent are re-employed within two years. But their new jobs are more likely to pay less than the ones they left behind.
The report says Australia has a flexible labour market that allows employers to easily hire and fire workers. This, combined with "a well-timed fiscal stimulus" helped blunt the impact of the global financial crisis on employment.
But unlike many other OECD countries, Australia does not have policies in place to limit the number of dismissals for economic reasons.
The notice periods given to workers facing dismissal are short by international standards.
Australian employers also have more limited obligations towards workers dismissed for economic reasons.
Apart from protection against unfair dismissals, laws governing hiring and firing "are not particularly strict such that Australian employers face relatively few restrictions on lay-offs".
"This approach makes Australian workers potentially more vulnerable to job loss, but at the same time promotes higher labour mobility and results in most unemployed workers finding their way back to employment relatively quickly," the report says.
"There is room for Australia to strengthen employer responsibilities towards workers they displace, including by introducing an obligation to keep good training records to facilitate the recognition of skills obtained on the job."
The report says "relatively little income and re-employment support is provided to most displaced workers through [Australia's] general labour market programs and social safety net".
While this approach had worked well in the past decade, it may become less successful in a less buoyant labour market "as now appears likely".
Even though a large majority of displaced Australian workers to find a job quickly, "a significant minority loses out in terms of job quality".
"In line with structural changes in the Australian labour market, many experience a switch from a permanent to a casual contract (at least temporarily), while some have to accept a part-time job instead of a full-time one," the OECD report says.
"Displaced workers can also incur significant reductions in their income from work, mostly due to the period of joblessness following displacement ... about one out of three displaced workers incur wage losses in their new jobs, which also appear to be persistent."
The shift from manufacturing to service jobs will require different skills that many displaced workers lack.
"These findings suggest that the overall flexibility and good performance of the Australian labour market should not be allowed to obscure the fact that it is quite difficult for some groups of workers to bounce back after displacement," the report says.
"Policies should seek to identify better these workers and help them in finding a suitably matched job as quickly as possible."
The OECD report recommends Australian employers take greater responsibility for workers they dismiss in providing longer notice periods for collective dismissals and mandatory notification of mass dismissals to Centrelink so authorities can respond more quickly.
It says better employment support and training needs to be provided to displaced Australian workers.
