Australia's Gambling Industries - Productivity Commission

What is the cost of job change?
There are essentially three costs involved in a change in job. The first is the loss in
income over the period of unemployment before a new job is found. The second is
the financial cost of the job search. The third is the cost to the employer of finding
and training a replacement.
The loss of income, however, is not borne fully by the unemployed. Of the gross
income, that part which is paid in tax is lost to the government, and to the extent that
the unemployed receives unemployment benefits, some part of the loss in after-tax
income is also transferred to the government.
Most job change costs will be the same whether the job change is voluntary or
involuntary. However, other costs may be different. Job search costs and the
prospects of new employment may be better if the job change is voluntary, as it
would be reasonable to presume that the employee has a chance to prepare for the
change. Where job change is involuntary, job search costs for the employee may be
higher and the prospects of re-employment lower as good references are unlikely to
be provided. Alternatively, if timing is at the discretion of the employer, the
employer’s job change costs may be lower. The extent to which these vary,
however, is difficult to determine, and in the absence of any data on this matter, the
Commission has not attempted the make any estimate of the differences in the costs
of job change depending on whether the change is voluntary or not, with the
exception of differences in the rate of assistance provided by government.
The level of government assistance varies depending on whether the job change was
voluntary or not. Where the job change was as a result of a resignation, the Newstart
Allowance is discounted by 18 per cent for the first 26 weeks.
Income loss when unemployed
For the Australian population as a whole, for any individual changing a job, the
average duration of unemployment is some 6 weeks. However, this rate varies
significantly. Some 50 per cent will find a job in a relatively short time (less than 2
weeks) and typically this does not result in the receipt of unemployment benefits.
Some take longer to find a job and may receive unemployment benefits for a much
longer period. The average duration of unemployment for any individual whose
unemployment is greater than 2 weeks is some 11 weeks. In this study, the
Commission has assumed that half of those who change their job have an average
duration of unemployment of 11 weeks and receive unemployment benefits over 9
of those 11 weeks.
MEASURING COSTS J.15