Earnings Losses of Displaced Workers: Canadian Evidence from a Large Administrative Database on Firm Closures and Mass Layoffs
by René Morissette, Xuelin Zhang and Marc Frenette
Business and Labour Market Analysis Division
Analytical Studies Branch Research Paper Series, No. 291
Context
What is the magnitude of the long-term earnings losses that Canadian workers suffer as a result of displacement? Since most of the evidence offered to date on this issue is based on U.S. data, the answer to this important question is currently unknown. Previous U.S. studies have shown that displaced workers suffer substantial and persistent earnings losses. However, most of the evidence offered is based either on a specific region or on relatively small samples. Furthermore, the evidence presented is not recent since it covers either the early to mid-1980s or the early 1990s.
Objective(s)
The paper documents short-term and long-term earnings losses for a large (10%) sample of Canadian workers who lost their job through firm closures or mass layoffs during the late 1980s and the 1990s. The nationally representative sample allows to examine how earnings losses vary across age groups, gender, industries and firms of different sizes. Furthermore, the paper conducts separate analyses for workers displaced only through firm closures and for a broader sample displaced either through firm closures or mass layoffs.
Findings
The main finding of the paper is that while the long-term earnings losses experienced on average by workers who are displaced through firm closures or mass layoffs are important, those experienced by displaced workers with considerable seniority appear to be even more substantial. High-seniority displaced men experience long-term earnings losses that represent between 18% and 35% of their pre-displacement earnings. For their female counterparts, the corresponding estimates vary between 24% and 35%.
Data source(s)
The paper uses the data set of the Longitudinal Worker File (LWF).
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