MRO Magazine

New study examines layoffs and their consequences

Ottawa, ON -- One of the possible consequences of layoffs for workers is wage loss. According to a new study f...


Human Resources

June 23, 2010
By MRO Magazine

Ottawa, ON — One of the possible consequences of layoffs for workers is wage loss. According to a new study from Statistics Canada, people who were laid off between 2002 and 2006 and who subsequently found work were nearly 60% more likely to experience a decrease than an increase in their hourly wages. This proportion is similar to that observed from 1993 to 1997.

When there was loss in hourly wages, it amounted to more than 20% in the majority of cases. This held true for both observation periods. Despite these losses, few workers fell into low income after being laid off.

This study compares the probability of layoff and the related consequences between two periods, that is, 1993 to 1997 and 2002 to 2006. The first period was marked by low employment growth and weak global demand, while the second period was characterized by sustained employment growth and a downturn in the manufacturing sector. The entire study period ends before the most recent economic slowdown.

Layoffs also affect pension plan coverage. While 57% of laid-off workers were not covered by a pension plan in either the lost or new job, approximately 20% lost their coverage by changing jobs. Furthermore, the new jobs were just as likely to be unionized as the old ones. This was true for both observation periods.

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The probability of finding a new job one year after being laid off was higher from 2002 to 2006 (81%) than from 1993 to 1997 (73%). This reflects the more favourable economic conditions in the 2000s, which lasted until the fourth quarter of 2008, that is, until the beginning of the most recent economic slowdown. This greater propensity to be employed one year after layoff was widespread, but it was more pronounced for women and less-educated workers.

Note: This article is based on Survey of Labour and Income Dynamics (SLID) cross-sectional and longitudinal data. The cross-sectional analysis covers the period from 1993 to 2007, which is itself divided into two sub-periods: 1993 to 2000 and 2001 to 2007. The longitudinal analysis compares what occurs after layoff using two panels (1 and 4). The consequences of layoffs are compared between two periods (1993 to 1997 and 2002 to 2006). The last year of each panel had to be excluded so that each laid-off person had an equal chance of finding employment during the observation period. Each panel of respondents, that is, approximately 15,000 households and 30,000 adults, is surveyed over six consecutive years. Bootstrap weights were applied in order to factor in the complex design of SLID.

The article Layoffs in Canada is available in the May 2010 online edition of Perspectives on Labour and Income, Vol. 11, no. 5, from the Key resource module at the www.statcan.gc.ca website, listed under Publications.