Executive summary
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Every year, the Canadian economy experiences a substantial amount of labour reallocation. Thousands of workers leave firms in search of better job opportunities. Employers adjust the size of their workforce through hiring or downsizing in response to general economic developments, technological changes, changing trade patterns and consumer preferences, exchange rate movements, and numerous other factors. It is sometimes asserted that, as a result of increased economic turbulence, the magnitude of labour reallocation has increased.
This article examines this assertion using data from both Statistics Canada’s Longitudinal Worker File (LWF) and Labour Force Survey (LFS).
The study shows that the pace of labour reallocation was no higher during the 2000s than it was during the 1980s or 1990s. This conclusion holds whether all workers are considered or whether attention is restricted to individuals aged 25 to 54.
The study also shows that, whether or not one controls for the aging of the workforce and/or for changes in unemployment, worker reallocation rates did not display any statistically significant trend during the period from 1976 to 2011.
During the 2000s, worker reallocation, defined as the sum of workers’ hiring rates and separation rates, varied substantially across industries and firm sizes, as small firms and low-wage industries exhibited both relatively high hiring rates and high separation rates. Worker reallocation also varied markedly across age groups, as young workers were hired and separated from employers much more frequently than their older counterparts. In contrast, the pace of worker reallocation varied to a lesser extent across provinces and education levels. In the aggregate, the pace of worker reallocation observed during the 2000s was, at about 45% of paid employment, fairly similar to that observed in the United States and the United Kingdom.
Many of the aforementioned differences in the pace of worker reallocation are also found when focusing specifically on layoffs.
During the 2000s, permanent-layoff rates differed considerably across industries and firm sizes. They also varied to a large extent across provinces and job tenure. As expected, provinces that had higher-than-average unemployment rates displayed higher-than-average permanent-layoff rates. Consistent with the notion that layoffs are often implemented on a seniority basis, newly hired workers?those hired within the previous two years?were at least four times more likely to lose their jobs than those who had been employed in a firm for six to ten years.
In the aggregate, men’s layoff rates were almost twice as high as women’s, but the difference largely reflected the predominance of men in industries with higher-than-average layoff rates (e.g., construction, mining, quarrying, and oil and gas extraction) and the predominance of women in sectors with lower-than-average layoff rates (e.g., educational services, health care, and social assistance).
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