Permanent layoffs in Canada: Overview and longitudinal analysis
by Garnett Picot, Zhengxi Lin and Wendy Pyper
Business
and Labour Market Analysis Division
Analytical Studies Branch research paper
series, No. 103
Canadians are increasingly concerned about permanent
layoffs, as many feel job instability and the possibility of job loss have increased
in the 1990s. What are the underlying causes of permanent layoffs? What roles
were played by cyclical variation in aggregate demand, variation in industrial
demand and differences in layoff rates by firm size?
Permanent layoffs are
much less cyclically sensitive than temporary layoffs, quits and hires and this
is true in the early 1990s as in the 1980s. Also, there is no evidence that permanent
layoffs were more common than temporary layoffs in firms' adjustments to
changing demand. Therefore, a decline in aggregate demand, as manifested in recessions,
is not the principle cause of permanent layoffs.
The changing industrial
structure of the economy is also not strictly associated with the level of layoffs.
That is, in general, declining industries do not have a higher layoff rate than
expanding industries. Other aspects seem to be at work such as the level of gross
job gain and loss at the company level in an industry, independent of the changes
in aggregate demand that are occurring in the industry. For example, permanent
layoffs are highly concentrated in the small firm sector as their workers are
three times more likely to experience such an event than their counterparts in
large companies.
The second part of the study investigates whether most
permanent layoffs were rare events for workers, or a continuation of a pattern
of repeat layoffs. Based on the workers' employment history over 10 years,
it explores the relationship between permanent layoff history and the probability
of being laid off. In Canada, only around 40% of all layoffs in any given year
are "rare" events. At the other end of the spectrum, stands a significant
minority of workers (around 15% in any given year), for who repeat layoffs are
the norm. Those in between these two extremes experienced mixed patterns of layoffs
over the period.
Those with rare events are generally higher skilled workers
with high long-term earnings (annual average over a decade), more likely to be
among women and members of the older age group. In terms of distinguishing between
"rare" or "repeat" events, where one works, as defined by
industry and size of company, is less discriminating than long-term earnings,
age and gender. Conversely, individuals experiencing a string of layoffs are most
often found among young low-skilled male workers.
View
the full publication.
You need to use the free Adobe Reader to view PDF documents. To view (open) these files, simply click on the link. To download (save) them, right-click on the link. Note that if you are using Internet Explorer or AOL, PDF documents sometimes do not open properly. See Troubleshooting PDFs. PDF documents may not be accessible by some devices. For more information, visit the Adobe website or contact us for assistance.
