Productivity in motion: The role of job switching

by Jack Buckley

Australia’s productivity slowdown over recent decades has coincided with a decline in job switching. International research suggests that the two may be connected, but direct Australian evidence is scarce.

New research by the e61 Institute sheds light on the possible contribution of job switching to productivity growth in Australia, finding:

  • Workers who switch jobs move to firms that are (on average) 13.1% more productive than the firms they leave. This differential is even more pronounced for young workers.
  • But the average productivity gap between ‘origin’ and ‘destination’ firms has more than halved since the mid-2000s, which could suggest a decline in productivity enhancing reallocation.

These findings have implications for policy, including:

  1. Declining labour mobility may have contributed to Australia’s productivity slowdown.
  2. Lowering barriers to job switching could help boost productivity. Examples of policies that could help achieve this include:
    • limiting the use of non-competes
    • reforming occupational licensing
    • replacing stamp duty with a land tax.