Unfair dismissal penalises workers: report

AS long as Australia persists with the current unfair dismissal laws, unemployment is likely to remain high, according to a recent report by the Centre of Independent Studies.

The report, Poor Laws, suggests that the unfair dismissal laws stifle job creation and compound Australia’s unemployment problems.

“Although intended to protect employees from ‘harsh, unjust or unreasonable’ termination of employment, such laws are a potential deterrent to both firing and hiring,” report author Kayoko Tsumori said.

“Despite a near decade of strong economic growth, Australia’s unemployment remains persistent and our record in job creation is poor when compared with the United States and the United Kingdom.”

The average duration of unemployment is now 50 weeks, compared with 13 weeks for the US.

“Joblessness is a major cause of poverty. Getting the poor into work is therefore key to alleviating poverty,” Dr Tsumori said.

However, Dr Tsumori said although on the surface the problem was a lack of available jobs, a more complex explanation was required.

“One explanation for the job shortage is the over-regulation of the labour market, exemplified by the unfair dismissal laws,” she said.

“Strict employment protection laws that aim to provide job security for those already in jobs might inadvertently prevent those without jobs from entering employment. Unfair dismissal claims impose prohibitive costs on employers, and drain considerable time and energy in conciliation proceedings, even when an employee proves unsatisfactory.”

Dr Tsumori said the firing costs made employers reluctant to take on additional staff.

“Labour force participants, once they become jobless, face a greater risk of remaining unemployed and becoming part of the long-term unemployment statistics,” she said.

“To boost the number of available jobs, and thus to combat long-term unemployment, the unfair dismissal laws need to be amended in such a way that small businesses will feel more confident about taking on new staff.”

Fifty four per cent of small business respondents to a 1999 Australian Chamber of Commerce and Industry survey – as compared with 47.7 per cent of medium businesses and 28.2 per cent of large businesses – indicated they might have hired more staff had it not been for the unfair dismissal laws.

Since the Federal unfair dismissal system was introduced an average 7,700 cases a year are dealt with through the Australian Industrial Relations Commission. In 2001, 369 cases were dealt with.

The report is the first in a series examining Australia’s labour market policies.

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