Executive summary

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Between October 2008 and July 2009, total employment fell by more than 400,000 in Canada. By January 2011, total employment had returned to the level observed in October 2008. Which workers were laid-off during this recession? To what extent did these workers differ from their counterparts who were laid-off during the recessions that took place during the early 1980s and the early 1990s? How many of them found a job shortly after being laid-off? Among those who were re-employed shortly after being laid-off, which ones, if any, experienced substantial pay cuts? This article uses data from Statistics Canada's Labour Force Survey to answer these questions.

The study uncovers several key patterns.

Compared with their counterparts who were permanently or temporarily laid-off during the early 1980s and the early 1990s, Canadian workers laid-off during the most recent recession were older, better educated, and less likely to come from the manufacturing sector. These temporal changes in the profile of laid-off workers resulted mainly from compositional effects, i.e., changes in the age/education profile of the Canadian workforce as well as the secular decline of the manufacturing sector.

Canadian workers were less likely to be laid-off during the most recent downturn than their counterparts were in the early 1980s and the early 1990s. Assessed on a monthly basis, the risk of layoff during the early 1980s averaged 2.9%; this rate is almost 1.5 times higher than the 2.0% rate observed in 2008-to-2011. The risk of layoff averaged 2.7% in the early 1990s.

During all three periods considered, chances of being temporarily or permanently laid-off were relatively high among young workers (those aged 15 to 24), individuals with no university degree, newly hired employees (those with two years or less of seniority), and those employed in the goods sector. However, such patterns are not specific to periods of economic slowdown: they are also observed during expansionary periods.

Of all workers laid-off in the 2008-to-2011 period, 50% found a paid job between one and four months after being displaced. This share was significantly higher (both statistically and quantitatively) than the corresponding proportion of 42% observed during the previous two recessions.

The workers most likely to be re-employed in the short term had the following characteristics: they initially expected to be recalled; they had a university degree; and they had more than five years of seniority.

On average, employees who were laid-off during the most recent downturn and who found a job shortly after being laid-off saw their average weekly wages drop from $734 to $703. However, one-quarter saw their weekly wages drop by 23% or more, while another one-quarter saw increases in weekly pay of at least 18%.

Average declines in weekly wages amounted to at least 10% for the following workers: those who lost union coverage; those who moved from a firm with at least 100 employees to a smaller firm; and those who changed both industry and occupation in the new job. Collectively, these groups represented about one-quarter of laid-off workers who were re-employed during the most recent recession. In contrast, employees who gained union coverage or moved from firms with fewer than 100 employees to firms with 100 or more employees registered average gains in weekly wages of between 8% and 11%. Collectively, the latter two groups represented about 17% of laid-off workers who were re-employed during the most recent recession.

Apart from displaying lower layoff rates and higher short-term re-employment rates than the previous two recessions, the most recent downturn was of shorter duration. Total employment (seasonally adjusted) took 27 months to return to its pre-recession level, compared to 53 months during the early 1990s and 40 months during the early 1980s.

While newly hired employees had a higher risk of layoff than high-seniority workers during all three recessions, the former saw their layoff rates drop significantly during the most recent downturn. In contrast, layoff rates of high-seniority workers did not fall during the most recent downturn. As a result, a greater proportion (28%) of workers laid-off during the most recent recession, than of workers laid-off during the recession of the early 1990s (17%) or the recession of the early 1980s (16%), had high seniority. Since high-seniority workers tend to experience substantial and sustained earnings losses, an important question for future research is whether the long-term average earnings losses of workers displaced during the most recent downturn will end up being higher or lower than those of their counterparts displaced during the early 1980s and the early 1990s.

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