The government needs to act to make it easier for Australians to leave their jobs to go to a new company in order to boost the country’s ailing productivity.

New research by economic research firm e61 Institute has found that the number of Australian workers leaving their job to go to a more productive company has declined over the last decade, and that this could be having a significant impact on Australia’s overall productivity.

The report found that while workers are still more likely than not to join a more productive company, more effort is needed from the federal government to improve job mobility.

For the report, the institute combined data on individual workers’ actual job switches with firm-level estimates of productivity, measured as output per full-time worker.

The research found that Australian workers who switch jobs are moving to companies that are on average 13 per cent more productive than the company they left.

This so-called productivity gap is wider for younger workers, with those aged between 25 and 34 years old moving to new jobs in businesses that are 14.6 per cent more productive on average.

But as the author of the report Jack Buckley said, it’s not all rosy reading on the Australian economy.

According to the research, only a slight majority – 53.6 per cent – of Australians workers switching jobs go to a more productive firm.

“Our research shows that the difference between the productivity of the firms workers leave and the firms they join has fallen over time,” Buckley said.

“We’ve seen the margin shrink from 14.9 per cent in the mid-2000s to just 6.7 per cent in the late 2010s.

“Our research also found that the share of workers moving to more productive firms when they switch jobs is falling.

“So, while workers still tend to move to more productive firms, this tendency is weakening.”

With workers moving to a more productive workplace more likely to become more productive themselves, this data has implications for Australia’s productivity in general.

According to the Productivity Commission’s most recent quarterly bulletin, productivity decreased by 2 per cent in the June 2023 quarter.

This was despite Australian workers working more hours than they ever have before.

“When a worker moves to a more productive firm this can make them more productive if the higher productivity of their new firm is due to better management, firm-specific know-how or more and better use of capital,” e61 Institute CEO Michael Brennan said.

“If this is the case, then workers switching to more productive firms could help boost aggregate productivity.”

The report pointed to a number of policy levers which could be pulled to improve job mobility in Australia, which in turn could boost productivity.

“There are policy levers available to governments that could decrease barriers for workers looking to switch jobs and move to better performing firms,” Brennan said.

“In turn this could help boost Australia’s productivity growth.

“Better regulation to limit the use of non-compete clauses would remove one growing source of friction.

“Reforms to occupational licensing and the replacement of stamp duty taxes with a land tax could also help create a more mobile labour force.”

There has been increased usage of non-compete clauses across Australia, particularly in the tech sector, with about one in five workers now subject to them.

There are concerns that these clauses are reducing competition and dragging down productivity.

Another way to potentially improve productivity is the implementation of four-day work weeks, with research finding that this can actually make workers more productive, happier and healthier.