RETRENCHMENTS

INTRODUCTION

Trends in retrenchment are of interest from both an economic and social perspective. From an economic perspective the level of retrenchments and industries associated with them can be used with other indicators (for example employment growth and aggregate hours worked) to understand the strength of the economy and the cyclical and structural changes occurring within it. From a social perspective, retrenchment represents a significant time of change in an individual's working life, and can be associated with a period of uncertainty and stress, as well as changes in financial security and may result in further job search or entrepreneurial activities.

This article examines retrenchments in Australia using data from the ABS' Labour Mobility Survey. It examines trends in retrenchments over the period February 2000 to February 2013, and highlights the characteristics and labour force outcomes of retrenched workers. The Labour Mobility Survey was conducted biennially between 2000 and 2012, and conducted again in 2013. Data relates to persons who reported being retrenched in the 12 months prior to the survey reference week¹.

RATE OF RETRENCHMENTS

Approximately two million people ceased a job during the 12 months to February 2013. While the majority of these (60%) left their last job for voluntary reasons, 19% (or 381,000) left their last job because they were retrenched or had their job made redundant². The remaining 21% left their last job because of their own ill-health or injury, or because the job was seasonal or temporary. When expressed as a proportion of all people who had been employed at some time over the previous 12 months, the rate of retrenchments in the 12 months to February 2013 was 3.1%.

The rate of retrenchments between 2000 and 2013 is shown in graph 1. Over this time, the rate fell from 4.0% in 2000 to a low of 2.0% in 2008, before increasing sharply in 2010 to 3.1%. It remained broadly at that level in 2012 and 2013 (2.6% and 3.1% respectively).



When examining trends in retrenchments by sex (graph 1), it is evident that the retrenchment rate for men has been consistently higher than that for women (for example 3.5% and 2.5%, respectively in the 12 months to February 2013). A major factor influencing the different retrenchment rates for males and females was that men were more concentrated in those industries which had a higher rate of retrenchments (e.g. construction, mining, manufacturing), and the female dominated industries (education and training, health care and social assistance) have maintained relatively low rates of retrenchment.

Graph 2 shows the rate of retrenchments for each state and territory in the years ending February 2000, 2004, 2008 and 2013³. Each state and territory followed the trend of Australia's retrenchment rate over the same time period, in falling between 2000 and 2008 before increasing in the most recent period. In the 12 months to February 2000, the Northern Territory, Queensland and Western Australia had the highest retrenchment rates of the states and territories (6.0%, 5.4% and 5.1% respectively). In the 12 months to February 2013, Tasmania and Queensland had the highest retrenchment rates of the states and territories (4.1% and 3.4% respectively).



RETRENCHMENTS BY INDUSTRY

The greatest numbers of persons retrenched in the twelve months to February 2013 were in the construction, retail trade and manufacturing industries. Together these three industries accounted for 38% of all retrenched persons. As construction and retail trade were two of the three largest employers in February 2013, the contribution of these two industries to the retrenchment level is not surprising. The contribution of the manufacturing industry to the retrenchment level is consistent with the long-term decline in manufacturing's share of total employment.

The retrenchment rate by industry⁴ (table 1) shows a slightly different pattern compared with the level data. The highest rates in the 12 months to February 2013 were in the electricity, gas, water and waste services (6.4%), construction (6.4%) and mining (6.0) industries. Electricity, gas, water and waste services and mining both had lower levels of retrenchment, but were two of the industries with a relatively low employment base, which resulted in a higher rate. Conversely, the retail trade and professional, scientific and technical services industries both had relatively high numbers of retrenched persons, but with a relatively large employment base, did not have significantly high retrenchment rates (3.5% and 3.7% respectively) compared to other industries.

Table 1. PROPORTION OF RETRENCHED PERSONS AND RETRENCHMENT RATE(a), By industry: February 2013

	Number of persons retrenched	Share of all employees retrenched	Persons working at February 2012	Retrenchment rate(a)
Labour force status in reference week of survey	'000	%	'000	%
Agriculture, forestry and fishing	*5.4	*1.4	322.5	*1.7
Mining	15.4	4.0	257.1	6.0
Manufacturing	39.9	10.5	888.6	4.5
Electricity, gas, water and waste services	*8.7	*2.3	136.7	*6.4
Construction	64.7	17.0	1 008.1	6.4
Wholesale trade	14.7	3.9	450.2	3.3
Retail trade	40.4	10.6	1 150.7	3.5
Accommodation and food services	29.2	7.7	718.9	4.1
Transport, postal and warehousing	23.1	6.1	587.7	3.9
Information media and telecommunications	*6.7	*1.8	217.7	*3.1
Financial and insurance services	*12.2	*3.2	411.4	*3.0
Rental, hiring and real estate services	*7.5	*2.0	184.2	*4.1
Professional, scientific and technical services	33.5	8.8	914.8	3.7
Administrative and support services	15.4	4.0	362.6	4.2
Public administration and safety	18.1	4.8	733.7	2.5
Education and training	12.3	3.2	887.6	1.4
Health care and social assistance	20.1	5.3	1 360.3	1.5
Arts and recreation services	*3.4	*0.9	190.7	*1.8
Other services	10.4	2.7	447.2	2.3
Total	381.4	100.0	11 230.7	3.4

* Estimate has a relative standard error of 25% to 50% and should be used with caution.
(a) The number of persons retrenched during the previous 12 months as a percentage of the number of people working at February 2012 (the beginning of the twelve month period). It is not possible to derive an estimate of the number of people employed by industry at some point over the 12 month period (the denominator used for the other rates in this article), so instead the level of employment at February 2012 (the beginning of the period) is used.
Source: Data available on request, Labour Mobility Survey, 2013

DEMOGRAPHICS OF RETRENCHED PERSONS

The age distribution of the retrenched population (graph 3) closely resembles the age distribution of all persons aged 15 years and over who are employed i.e. the age groups with the largest numbers of persons retrenched during the 12 months to February 2013 (the 25-34, 35-44 and 45-54 years respectively), are also the same age groups with the largest number of employed persons. As with the industry analysis above, the retrenchment rate for each of the age groups (graph 4) shows a different pattern to the retrenchment level. For both males and females, the retrenchment rates were highest for the 20-24 (5.2% and 3.7% respectively) and 15-19 year age groups (4.1% and 3.5% respectively).





With the exception of people with postgraduate degrees, retrenchment rates decreased as educational attainment increased (graph 5) i.e. in the 12 months to February 2013 the rates were highest for those with a highest educational attainment of Year 11 and Year 10 or below (3.8% and 4.1% respectively), and generally decreased as the highest attainment reached bachelor degree and graduate diploma/certificate (1.9% and 0.9% respectively). While there was a relatively small number of people with postgraduate degrees retrenched in the 12 months to February 2013, the small number of people employed with these higher degrees meant that they had a higher rate than those with bachelor degrees (2.5% compared to 1.9% respectively).



LABOUR FORCE OUTCOMES OF RETRENCHED PERSONS

Of those retrenched in the 12 months to February 2013, 50% were employed at the end of that period, while 29% were unemployed and 22% were not in the labour force (table 2). Among those employed, many had changed at least one aspect of the work they had previously done: 27% had changed industry; 19% had changed occupation; 33% had changed their hours of work; and 17% had a change of employment type (for example from employee to an owner-manager of an incorporated or unincorporated enterprise, or vice versa). Those changing their industry, occupation, hours of work or employment type may have changed several of these aspects, whilst others may have only changed one.

The labour force outcomes of those retrenched in the 12 months to February 2006 and February 2000 were not statistically significantly different from those from February 2013.

Table 2. PERSONS RETRENCHED DURING THE PREVIOUS 12 MONTHS, Labour force status in the reference week of the survey

	February 2000	February 2006	February 2013
Labour force status in reference week of survey	%	%	%
Employed	46.4	54.0	49.5
Changed industry(a)	24.4	28.8	26.8
Changed occupation(a)	18.5	20.9	19.0
Changed employment type(a)	n/a	21.5	17.1
Changed usual hours worked(a)	n/a	38.6	33.1
Unemployed	29.9	28.7	28.9
Not in the labour force	23.7	17.3	21.6
Total	100.0	100.0	100.0

n/a Not collected in the 2000 Labour Mobility Survey.
(a) These categories are not mutually exclusive.
Source: Data available on request, Labour Mobility Survey, 2013

FORTHCOMING IMPROVEMENTS TO ABS RETRENCHMENT DATA

Information on retrenchments is important in understanding the performance of the labour market, particularly during economic downturns. While this analysis has made the most of the largely biennial data on retrenchments from the Labour Mobility Survey, the picture on retrenchments is limited due to its biennial frequency and 12-month perspective. This means that for example in the post-global financial crisis downturn, retrenchment data is only available for the periods prior to February 2008 and following February 2010, and it is difficult to infer the pattern of retrenchments in the period in between (which included the start of global financial crisis).

To better inform on changes in the labour market the ABS will introduce a comprehensive and more frequent measure of retrenchments in the Labour Force Survey (LFS). The ABS will commence collecting information on retrenchments on a quarterly basis in the LFS from August 2014. Data will be presented on the numbers retrenched, as well as a retrenchment rate derived as a proportion of the number of people employed in the previous quarter. These data are expected to be available from the May 2015 issue and will be presented by labour force status by state; by labour force status by sex; and by age by sex.

FURTHER INFORMATION

For more information about the information presented in this article, please contact the Labour Market Statistics Section on (02) 6252 7206 or email labour.statistics@abs.gov.au.

END NOTES

1. Retrenchment estimates presented in this analysis do not necessarily capture all people who were retrenched (or all instances of retrenchment) in the 12 month period. The Labour Mobility Survey only collects information on the reason for a person ceasing their last job in a 12 month period. It would not capture people who were retrenched in the twelve month period, but then commenced and ceased a subsequent job for another reason. Likewise, in the case of people who were retrenched more than once in the twelve month period, it would only capture the retrenchment from their last job.

2. Retrenchments defined in this article include persons who ceased their last job because they were either:

• employees who were laid off, including no work available, made redundant, employer went out of business or dismissed; and
• self employed people whose business closed down for economic reasons, including 'went broke', liquidated, no work, or no supply or demand.

3. Data by state and territory relates to the person's usual residence in the survey reference week, which may differ from the state or territory where the retrenchment occurred.

4. It is not possible to derive an estimate of the number of people employed by industry at some point over the 12 month period (the denominator used for the other rates in this article), so instead the level of employment at February 2012 (the beginning of the period) is used.