Statistics Canada Thinking about the Impact of Lay-offs

The following are quotes from Statistics Canada daily release, May 10

What we know so far:

On average, 12.4% of Canadian paid workers aged 15 to 64 have been laid-off on a monthly basis since February 2020 (Table 1). In contrast, average monthly layoff rates during the first two months following previous labour market downturns varied between 2.5% and 3.5%.

During the last three recessions (1981-1982, 1990-1992 and 2008-2009), young workers, less educated workers, and recently hired workers were more likely to be laid-off—temporarily or permanently—than other employees (Chan, Morissette and Frenette, 2011). This is still the case so far: layoff rates since February 2020 have been higher among the aforementioned groups than among other groups of workers (Table 1).

During the last three recessions, roughly 45% of all laid-off workers were permanently laid-off (Table 1). The remainder were involved in temporary layoffs.  But these temporarily laid-off workers were not insulated from subsequent job loss: about 15% of them lost their job year the following year.

The degree to which the COVID-19 pandemic will result in permanent layoffs, i.e. job losses, is crucial to understanding how it might affect Canadian workers in the longer term. The reason is simple: job loss reduces the earnings of many displaced workers not only in the short term, but also in the longer term (Jacobson, Lalonde and Sullivan, 1993; Morissette, Zhang and Frenette, 2007; Morissette, Qiu and Chan, 2013).  From the late 1970s to the early 2010s, at least one in five permanently laid-off workers saw their real earnings decline by at least 25% even five years after job loss (Chart 1).

Although Employment Insurance benefits offset part of the earnings losses, these benefits are usually exhausted after one year. As a result, five years after job loss, the earnings losses of displaced workers can be mitigated only by the progressivity of the tax and transfer system and, for some of those who are married or in a common-law relationship, by an increase in the annual hours worked by their spouse (Stephens, 2002).

 

Table 1
Selected statistics — current and previous labour market downturns
Table summary
This table displays the results of Selected statistics — current and previous labour market downturns. The information is grouped by Labour market downturn (appearing as row headers), Average monthly layoff rates, calculated using percent units of measure (appearing as column headers).
Labour market downturn Average monthly layoff rates
1981 to 1982 1990 to 1992 2008 to 2009 February-March and March-April 2020
percent
Overall 3.5 3.4 2.5 12.4
Men 3.9 4.1 3.3 12.2
Women 2.9 2.5 1.8 12.6
Age group
15 to 24 5.2 4.8 4.1 25.1
25 to 44 2.9 3.1 2.1 10.7
45 to 64 2.8 2.9 2.3 9.9
Educational attainment
Below Bachelor’s degree 3.8 3.8 3.0 15.1
Bachelor’s degree or higher 1.2 0.8 1.1 7.2
Tenure with employer
Less than 2 years 6.2 6.2 4.3 17.7
2 to 5 years 2.5 2.2 2.0 13.2
More than 5 years 1.3 1.4 1.4 8.2
Permanently laid-off workers as a percentage of all laid-off workers 46.2 46.4 44.6 Note : not applicable
Percentage of temporarily laid-off workers who lose their job the following year 15.2 16.4 15.4 Note : not applicable

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