Executive summary
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In its 2009 report (Stiglitz, Sen, and Fitoussi 2009), the Commission on the Measurement of Economic Performance and Social Progress identified economic insecurity resulting from job loss as a key dimension of individuals' lives affecting their well-being. One of the Commission's recommendations was that statistical agencies should improve measures of quality of life, including measures of individuals' economic insecurity. This study contributes to this objective by providing the longest time series available to date in Canada on two dimensions of economic insecurity: the risk of permanent layoff and the earnings losses experienced in the year following layoff.
While the study provides time series of permanent layoff rates and short-term earnings losses from the late 1970s to 2007, it focuses on outcomes observed in 1978-1980 and 2005-2007, two periods of economic growth during which labour market conditions—as proxied by the unemployment rate of prime-aged men—were fairly similar. 1 In the aggregate, Canadian workers were less likely to be permanently laid-off in the mid-2000s than they were in the late 1970s. Within the manufacturing sector, men's risk of layoff changed little between the late 1970s and the mid-2000s, while women's risk of layoff fell by 2.5 percentage points. In industries other than manufacturing, men's risk of layoff declined by 2.4 percentage points, while women's risk of layoff declined by 0.4 percentage points.
Across the labour force, the share of men who were re-employed in the year following layoff changed little between the late 1970s and the mid-2000s. In contrast, the share of women who were re-employed increased by 10 percentage points; increases were evident among those who lost a job in manufacturing or in industries other than manufacturing.
With respect to short-term earnings losses experienced by displaced workers, including workers who were not re-employed in the year following layoff, different trends were evident among those who lost a job in manufacturing and those who lost a job in all other industries. Median earnings losses of men laid-off from jobs in manufacturing increased by about 6 percentage points between 1979-1980 and 2005-2007. In contrast, median earnings losses of their female counterparts changed little, largely because of increases in post-displacement re-employment rates over the period.
In contrast, workers laid-off from jobs in industries other than manufacturing experienced smaller median earnings losses in 2005-2007 than in the late 1970s. The median earnings losses of displaced men were 8-percentage-points smaller in the mid-2000s than in the late 1970s, while the median earnings losses of displaced women were 18-percentage-points smaller. The improvement observed for women reflects increases in post-displacement re-employment rates between the periods and the smaller earnings losses experienced by those who found re-employment.
In sum, the study compares the risk of layoff and associated losses during two periods of economic growth separated by almost 30 years. Evidence suggests that, for many groups of workers, particularly those in industries other than manufacturing, economic insecurity resulting from job loss was lower in the mid-2000s than it was in the late 1970s.
However, the study also documents a substantial increase in the short-term earnings losses experienced by workers laid-off from manufacturing firms over the last decade. Between 1998–2000 and 2005–2007, the median short-term earnings losses experienced by men displaced from manufacturing (including those who were not re-employed in the year following layoff) increased by about 12 percentage points. The corresponding increase for women displaced from manufacturing amounts to roughly 18 percentage points. This substantial increase in earnings losses coincides with the sharp employment decline observed in manufacturing since 2004.
Several limitations of this study must be noted. Most of the results are average effects and thus do not rule out the possibility that, in certain regions, cities, age groups, education levels, industries, and/or occupations, workers may have experienced an increased risk of job loss and/or increasing earnings losses. Furthermore, the multivariate analyses conducted do not control for workers' educational attainment. Since Canadian workers are better educated now than they were in the late 1970s, and since post-displacement employment rates generally increase with education, the results are consistent with the possibility that, within cells defined jointly by age and education, post-displacement employment rates may have fallen for some groups of men and may have risen to a lesser extent than is observed in the raw data for some groups of women. Finally, given data limitations, trends in the financial consequences of job loss were documented only for short-term earnings losses. Different results might emerge if long-term losses were to be considered.
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