Job loss and labour market adjustment in the Canadian economy

by Garnett Picot and Ted Wannell
Business and Labour Market Analysis Division
Analytical Studies Branch research paper series, No. 005

This paper assesses the labour market adjustment experiences of Canadian workers who were permanently laid off between 1981 and 1984. Such lay-offs could be due to structural or cyclical causes. Data from a special survey are used to answer a number of questions.

What types of workers were most likely to experience job loss and in which industries or occupations did they work? What happened to these workers when their jobs were abolished? Did they adjust relatively quickly and successfully, finding new jobs in a short time at the same income level? Or did a significant number spend long periods seeking new jobs and undergo large pay cuts? How many turned to retraining or relocation in an attempt to find a new job? Were there major movements among industrial sectors in the process (say from manufacturing to services), and how did workers who made such a transition fare?

Circumstances varied tremendously from one worker to another. Nearly one-quarter of the workers who found new jobs did so within three weeks, while 10% took more than one year. Of those finding new jobs, 55% found jobs paying higher wages, 45% took pay cuts in their new jobs. On the whole, however, these permanently laid off workers fared poorly compared to the rest of the labour force. Their unemployment rate in January, 1986 (the time of the survey) was 25%, more than double the national average. Even among workers with considerable experience in the lost job (3 years or more), the unemployment rate was 24%.

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