Retrenched Workers: Incidence & How They Adjust

A staff research paper by Greg Murtough and Matthew Waite on Unemployment and Re-employment of Displaced Workers examines the incidence and adjustment experiences of workers who are displaced by economic change.

Since the mid-1970s, the aggregate annual rate of retrenchment has fluctuated in a counter-cyclical pattern around a relatively stable long-term trend of about 5 per cent.

The paper shows that the probability of retrenchment and the nature of post-retrenchment adjustment varies between different groups of workers and depends on general economic conditions.

Females were found to be more likely to leave the labour force after being retrenched (rather than search for another job). However, the probability of being re-employed is similar for males and females who remain in the labour force.

The paper also found that re-employment becomes more likely as the time since being retrenched increases. This suggests that the adverse employment effects of retrenchment dissipate over time.