Study: Risk of layoff and earnings losses associated with layoffs

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Canadian workers aged 25 to 54 were less likely to lose their job during the mid-2000s than they were in the late 1970s.

In addition, those who were laid off from a job in industries other than manufacturing experienced smaller short-term earnings losses from 2005 to 2007 than their counterparts did in the late 1970s.

However, men aged 25 to 54 who were laid off in manufacturing from 2005 to 2007 experienced larger short-term earnings losses than their counterparts did in the late 1970s.

Between 1978 and 1980, 8.3% of jobs held by workers aged 25 to 54 ended with a permanent layoff, compared with 6.1% between 2005 and 2007. A permanent layoff occurs when the employee does not return to his or her employer in the year of the layoff or the following year.

Falling layoff rates were observed in manufacturing and outside manufacturing. For instance, permanent layoff rates in manufacturing averaged 6.6% during the late 1970s and 5.4% during the mid-2000s.

In industries other than manufacturing, laid-off workers experienced smaller short-term earnings losses from 2005 to 2007 than in the late 1970s.

In the late 1970s, men who were laid off from industries other than manufacturing received 12% lower earnings one year after being displaced compared with the year preceding displacement. From 2005 to 2007, men who were laid off had lost 4% of their pre-displacement earnings a year later.

For women, earnings fell 29% in the year after displacement in the late 1970s. For those laid off between 2005 and 2007, however, earnings had declined 11% a year later.

Different patterns were observed in the manufacturing sector, especially for men. During the late 1970s, men who were laid off from manufacturing jobs lost 12% of their pre-displacement earnings. However, men who were laid off between 2005 and 2007 lost 18% of their pre-displacement earnings. Earnings losses of their female counterparts were little changed.

Earnings losses of displaced manufacturing workers increased substantially between the late 1990s and mid-2000s.

For instance, from 1998 to 2000, earnings for women who were laid off declined 17% in the year following displacement. From 2005 to 2007, their earnings fell 35% in the following year. The corresponding numbers for men are 7% and 18%. This increase in earnings losses coincided with the sharp decline in employment observed in manufacturing since 2004.

Note: The study "How Have the Risk of Layoff and Earnings Losses of Laid-off Workers Evolved since the Late 1970s in Canada?" analyses permanent layoff rates and short-term earnings losses following displacement for the period from 1978 to 2007, the year preceding the most recent economic slowdown. Short-term earnings losses are defined as the percentage change in total earnings observed from the year preceding displacement to the year following displacement. Data came from the Longitudinal Worker File.

The research paper "How Have the Risk of Layoff and Earnings Losses of Laid-off Workers Evolved since the Late 1970s in Canada?," part of Analytical Studies Branch Research Paper Series (11F0019M2011339, free), is now available from the Key resource module of our website under Publications.

Similar studies from the Social Analysis Division are available online (www.statcan.gc.ca/socialanalysis).

For more information, or to enquire about the concepts, methods or data quality of this release, contact René Morissette (613-951-3608), Social Analysis Division.