Life After the High-tech Downturn: Permanent Layoffs and Earnings Losses of Displaced Workers
by Marc Frenette
Business and Labour Market Analysis Division
Analytical Studies Branch Research Paper Series, No. 302
Context
The high-tech sector was a major driving force behind the Canadian economic recovery of the late 1990s. It is well known that the tide began to turn quite suddenly in 2001 when sector-wide employment and earnings halted this upward trend, despite continued gains in the rest of the economy. As informative as employment and earnings statistics may be, they do not paint a complete picture of the severity of the high-tech downturn. A decline in employment may result from reduced hiring and natural attrition, as opposed to layoffs, while a decline in earnings among high-tech workers says little about the fortunes of laid-off workers who did not regain employment in the high-tech sector.
Objective(s)
This study explores permanent layoffs in the high-tech sector, as well as earnings losses of laid-off high-tech workers.
Findings
The findings suggest that the high-tech downturn resulted in a sudden and dramatic increase in the probability of experiencing a permanent layoff, which more than quadrupled in the manufacturing sector from 2000 to 2001. Ottawa-Gatineau workers in the industry were hit particularly hard on this front, as the permanent layoff rate rose by a factor of 11 from 2000 to 2001. Moreover, laid-off manufacturing high-tech workers who found a new job saw a very steep decline in earnings. This decline in earnings was well above the declines registered among any other groups of laid-off workers, including workers who were laid off during the "jobless recovery" of the 1990s. Among laid-off high-tech workers who found a new job, about four out of five did not locate employment in high-tech, and about one out of three moved to another city. In Ottawa-Gatineau, about two in five laid-off high-tech workers left the city.
Data source(s)
This study uses the Longitudinal Worker File (LWF).
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