Study: How families respond to layoffs

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Married women in at least some Canadian families were able to adjust to their husband's layoff by increasing their own employment income during the 1990s, a new study suggests.

The study, published today in the Analytical Studies Branch Research Paper Series, assessed whether the earnings of wives and teenagers increased in response to layoffs experienced by husbands between 1987 and 2001.

It found that one set of families—those that had no children aged 15 and over—appeared to have adjusted partially to the layoff of the husband through an increase in the wife's employment income.

Five years after the husband's layoff, the increase in the earnings of wives in these families offset about one-fifth of the losses experienced by the husband.

Husbands in these families experienced losses in earnings that averaged $12,200 (in 2002 dollars). However, their wives increased their earnings by roughly $2,700, thereby mitigating the income losses experienced by the family.

Among these families, those in which the layoff of the husband led to a loss in pension coverage, which is generally associated with a loss of a relatively well paid job, experienced bigger income losses.

Five years after the layoff, husbands in such families had average earnings losses that amounted to $16,000. Wives' responses to these losses led to increases in earnings averaging $3,800.

However, the study found virtually no evidence that the earnings of young people increased in response to their father's layoff. There was also no evidence of any similar compensatory response among married women in other types of families.

The study also investigated whether unattached men experienced smaller earnings losses than their married counterparts following a layoff.

It showed that even though they likely have greater geographic mobility than husbands, unattached males generally do not fare better than husbands after a layoff. Their earnings losses five years after a layoff averaged $13,700, no less than the losses of $12,300 incurred by husbands.

Since unattached men generally have lower earnings than married men, they ended up experiencing bigger losses in relative terms. The earnings losses they suffered five years after the layoff represented 39% of their pre-displacement earnings, compared with 27% for married men.

The study also found that Employment Insurance (EI) benefits and the tax system played a key role in mitigating the income losses suffered by unattached individuals and families of laid-off husbands.

Both EI benefits and the tax system reduced after-tax income losses in the short run while the tax system also reduced these losses in all subsequent years.

Definitions, data sources and methods: survey number 4107.

The study "How do families and unattached individuals respond to layoffs? Evidence from Canada" is now available as part of the Analytical Studies Branch Research Paper Series (11F0019MIE2008304, free) from the Publications module of our website.

Related studies from the Business and Labour Market Analysis Division can be found in the publication Update on Analytical Studies Research (11-015-XIE, free), also available on our website.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Yuri Ostrovsky (613-951-4299), Business and Labour Market Analysis Division.