The rising cost of losing a job adds to insecurity

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Job insecurity has increased during the 1990s, contrary to Government claims that there is little evidence to support the phenomenon, according to a report published today.

The main reason for a growing sense of insecurity has been not so much a drop in the average length of time people manage to hold a job as the rising costs of job loss. As ministers have suggested, there has been little decline in the typical job tenure - it has actually increased since the mid-1980s.

However, the costs of becoming unemployed have risen sharply. They include longer spells in unemployment, reduced levels of benefits relative to earnings, and the lower wage most people can expect to earn when they are re-employed. In addition, a smaller proportion of the workforce is covered by employment protection legislation than 20 years ago, although this coverage has improved during the past decade.

The evidence, published by the independent Employment Policy Institute, shows that there is some justification for the widespread sense of insecurity revealed by opinion polls.

The report, written by economists Paul Gregg and Jonathan Wadsworth at the London School of Economics, identifies three potential causes of insecurity: shorter job tenure, weaker job protection, and increased costs of unemployment.

The average length of time in a job fell from 6 years 1 month in 1975 to 4 years 5 months in 1990, and has climbed back to 5 years 6 months since then. Job tenure for men, especially the over-50s, fell steadily until 1990 before stabilising. For women it was flat but has increased steadily since 1990, mainly because maternity leave allows mothers to return to the same job.

However, not only has the decrease in average tenure been modest, it also tends to fall when the economy is doing well because more people switch jobs voluntarily.

More significant, the authors argue, has been the rise in the cost of job loss.

People spend 20 per cent longer in unemployment compared to the mid-1970s, although there has been little change during the past 10 years. The value of benefits received has fallen relative to the average wage.

But the biggest cost is the fact that the wages accepted by somebody taking a job after a spell of unemployment are typically lower than in the job they lost. This gap has increased over time. Only just over a quarter of "entry" jobs are full time and permanent, and the typical weekly wage for somebody re-entering work is pounds 100 a week.

The report concludes: "It is easier and probably more sensible to try and reduce the costs associated with job loss rather than to stop job losses.

"Unfortunately, over the past 20 years for many people these costs appear to have risen rapidly."