Appendix II: Identification of laid-off workers in the Labour Force Survey data

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With the Labour Force Survey (LFS) Tabulations (TABS) files, individuals are selected if they: 1) are aged between 15 and 64; 2) are not a full-time student; and 3) worked in a paid job in month t-1, the month preceding the layoff. Among these, workers are counted as being laid-off in month t if the WHYLEFT2 variable indicates a layoff (i.e., if WHYLEFT2 variable equals to 4). This variable indicates a response of "lost job or laid-off" to the question "What was the main reason … stopped working at that job?" This question is asked when individuals are not currently working but have worked in the preceding 12 months.

Further to the 1997 LFS redesign, an additional question, "Can you be more specific about the main reason for …'s job loss?," was added to probe the specific nature of involuntary job loss. The expanded response categories are captured in the WHYLEFT variable, which allows identification of those who lost their jobs for any of the following reasons: they were seasonal, temporary, or contract workers; they were casual employees; the company moved or went out of business; poor business conditions or temporary closure; dismissal; or other reasons. However, since the current analysis spans pre- and post-1997, the WHYLEFT2 variable is used instead of WHYLEFT to identify layoffs.

To calculate layoff rates, monthly transitions from paid employment to non-employment due to layoffs are captured. For each pair of months selected, inflows into layoffs between month t-1 and month t are divided by the number of workers in paid employment in month t-1. Suppose: a) there are X paid workers in month t-1; and b) Y workers are laid-off between month t-1 and month t. Then the layoff rate for the pair of months t-1 and t is Y/X. Averaging this layoff rate across all pairs of months observed during a downturn yields the downturn-specific layoff rate (e.g., 1.95% for all pair of months starting in October-November 2008 and ending in December 2010-January 2011).

Using this approach, one can follow 12 month-to-month transitions in a given year by means of the LFS data to derive a yearly count of layoffs. This annual measure can then be compared with the annual counts from the Longitudinal Worker File (LWF). Text Table 1 in appendix II shows the yearly counts from the two files from 1978 onwards. Columns 1 and 2 present the yearly layoff count for both permanent and temporary layoffs. Column 3 presents the estimated number of permanent layoffs from the LWF.

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