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The Risk and Cost of Job Loss in Canada, The Risk and Cost of Job Loss in Canada, 1978-2008 Ren Morissette, Hanqing Qiu and Ping Ching Winnie Chan R M i tt H i Qi d Pi Chi Wi i Ch Social Analysis Division Statistics Canada

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SLIDE 1

The Risk and Cost of Job Loss in Canada, The Risk and Cost of Job Loss in Canada, 1978-2008

R é M i tt H i Qi d Pi Chi Wi i Ch René Morissette, Hanqing Qiu and Ping Ching Winnie Chan

Social Analysis Division Statistics Canada Statistics Canada

1

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SLIDE 2

Plan of presentation Plan of presentation

I MOTIVATION

  • I. MOTIVATION
  • II. DATA
  • III. METHODS
  • IV. RESULTS
  • V. CONCLUSION

2

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SLIDE 3
  • I. Motivation
  • I. Motivation
  • Stiglitz (2009) report:

“Steps should be taken to improve measures of people’s health, education, personal activities, political voice, social connections, environmental conditions and insecurity.” (p. 58)

  • Goal = contribute to the measurement of economic insecurity

due to job loss

  • r job (in)security

by analyzing 3 of its due to job loss―or job (in)security―by analyzing 3 of its dimensions:

– probability of job loss I id f l t f ll i j b l – Incidence of re‐employment following job loss – Short‐term + longer‐term earnings losses following job loss

3

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SLIDE 4
  • I. Motivation
  • I. Motivation
  • Assessing ∆Probability of job loss may:

– help uncover changes in the employer‐employee relationship – have implications for education/training policies concerned with workers’ adaptability to shocks

  • Documenting the evolution of re‐employment rates and

l i l i f di i di longer‐term earnings losses informs discussions regarding:

– Optimal design of Employment Insurance (EI) program – Policies, if any, aimed at compensating displaced workers

4

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SLIDE 5
  • II. DATA
  • II. DATA
  • Longitudinal Worker File (LWF): 1978‐1989 + 1983‐2010
  • LWF:

– Administrative data set – 10% random sample of Canadian workers I l d – Includes:

  • Age, sex, marital status (no info on education & occupation)
  • Industry, union status, firm size, pension coverage

y, , , p g

  • *** Allows the identification of layoffs vs other separations

(through the record of employment :ROE)

  • If laid‐off worker returns to the firm in year t or year t+1 == temporary

layoff, otherwise permanent layoff.

I

5

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SLIDE 6
  • II. DATA
  • II. DATA
  • Focus is on permanent layoffs among …
  • … Paid workers aged 25 to 54

6

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SLIDE 7
  • II. DATA
  • II. DATA
  • OUTCOMES CONSIDERED:

OUTCOMES CONSIDERED:

  • 1. Permanent layoff rate =

/ – Number of permanent layoffs_t (from LWF) / Average annual paid employment_t (from LFS)

  • 2. Post‐layoff paid employment rate =

– % of laid‐off workers with wages and salaries in the year following layoff (t+1)

7

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SLIDE 8
  • II. DATA
  • II. DATA
  • 3. Short‐term earnings losses: = 1 year after layoff

– Narrow sample = workers with wages from t‐1 to t+1 – Broad sample = add workers with no wages in t+1

4 Long term earnings losses : 5 years after layoff

  • 4. Long‐term earnings losses : = 5 years after layoff

– Narrow sample = wages >= $10,000* in t‐1 and >0 up to t+5 – Broad sample = add workers with no earnings in some post‐layoff years if they filled a tax form in t+5 (and still alive) y + – Sub‐samples = workers with “stable Labour market attachment” and “high‐seniority” workers:

  • a) >= $10 000 from t 6 to t 4 b) > 0 from t 3 to t 1 and c) > 0 up to t+5
  • a) >= $10,000 from t‐6 to t‐4, b) > 0 from t‐3 to t‐1, and c) > 0 up to t+5

(narrow), or other restrictions (broad)

* 2002 dollars

8

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SLIDE 9
  • II. DATA
  • II. DATA

5 Short‐term (measured) earnings declines: = 1 year after layoff

  • 5. Short‐term (measured) earnings declines: = 1 year after layoff

– Explain the worsening of earnings declines among displaced manufacturing workers from the late 1990s to the mid‐2000s

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SLIDE 10
  • III. METHODS
  • III. METHODS
  • Short‐term earnings losses + Long‐term earnings losses:

– Fixed effects models à la Jacobson, Lalonde and Sullivan (1993) – Control group = individuals who satisfy the earnings restrictions imposed on the narrow treatment group but who were not laid‐off in year t – For high‐seniority workers and workers with stable labour market h ll i f ll ( ) 3 i attachment, we allow earnings to fall (up to) 3 years prior to displacement F l b th l E i d E i d – For narrow samples: both log Earnings and Earnings are used as a dependent variable For broad samples: Earnings – For broad samples: Earnings

10

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SLIDE 11
  • III. METHODS
  • III. METHODS
  • 30 cohort‐specific models of short‐term losses

30 cohort specific models of short term losses

  • 26 cohort‐specific models of long‐term losses
  • 16 cohort‐specific models of long‐term losses for high‐

seniority workers and workers with stable l.m.a. y

  • Worsening of measured short‐term earnings declines of

displaced manufacturing workers 1998 99 vs 2005 06 displaced manufacturing workers, 1998‐99 vs 2005‐06:

– Decomposition method of Firpo, Fortin and Lemieux (2009)

11

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SLIDE 12
  • IV. RESULTS
  • IV. RESULTS

12

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SLIDE 13

Despite numerous changes in the Canadian labour market, the risk of job loss did not trend upwards over the last three j p decades

PERMANENT LAYOFF RATES OF WORKERS AGED 25-54

12 0 14.0 16.0

%

8.0 10.0 12.0 2.0 4.0 6.0 0.0 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Men Women 13

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SLIDE 14

This was true in manufacturing … g

PERMANENT LAYOFF RATES IN MANUFACTURING

%

12.0 14.0 16.0

%

6 0 8.0 10.0 2.0 4.0 6.0 0.0 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Men Women 14

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SLIDE 15

… as well as outside manufacturing

PERMANENT LAYOFF RATES OUTSIDE MANUFACTURING

%

12.0 14.0 16.0

%

6 0 8.0 10.0 2.0 4.0 6.0 0.0 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Men Women 15

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SLIDE 16

Yet a closer look at manufacturing reveals sharply diverging l ff t i d t i i t layoff rates across industries in recent years

1998-99 2005-06 1998-99 2005-06 % Permanent layoff rates in manufacturing, by 3-digit industry, 1998-1999 vs 2005-2006 Men Women % Manufacturing 6.1 5.1 6.5 5.6 Textile mills 4.0 6.7 4.0 9.0 Textile product mills 5.4 5.7 6.0 6.6 Clothing 7.4 8.4 6.6 9.3 Petroleum and coal products 3.1 1.8 2.6 1.5 Petroleum and coal products 3.1 1.8 2.6 1.5 Non-metallic mineral products 8.6 6.3 7.9 4.3

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SLIDE 17

Women’s post‐displacement paid employment rates (1 year after job loss) increased markedly j ) y

Post-displacement paid employment rates in t+1,1978-2008

80 0 85.0 90.0

%

70.0 75.0 80.0 55.0 60.0 65.0 50.0 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Men Women 17

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SLIDE 18

Although sensitive to labour market tightness, short‐term earnings losses displayed no trend in the aggregate g p y gg g

Short‐term earnings losses, 1979‐2008

) M All i d i b) W All i d i a) Men: All industries b) Women: All industries Narrow sample: log Y Narrow sample: Y

%

Narrow sample: log Y Narrow sample: Y

%

10 Broad sample: Y

%

10 Broad sample: Y ‐40 ‐30 ‐20 ‐10 ‐40 ‐30 ‐20 ‐10 ‐60 ‐50 79 82 85 88 91 94 97 00 03 06 ‐60 ‐50 79 82 85 88 91 94 97 00 03 06

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SLIDE 19

Despite falling aggregate unemployment rates, short‐term earnings losses of displaced manufacturing workers worsened from the late 1990s to the mid‐ 2000s 2000s

Short‐term earnings losses, 1979‐2008

c) Men: Manufacturing d) Women: Manufacturing 10 10 ‐20 ‐10 ‐20 ‐10 ‐50 ‐40 ‐30 ‐50 ‐40 ‐30 ‐60 79 82 85 88 91 94 97 00 03 06 ‐60 79 82 85 88 91 94 97 00 03 06

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SLIDE 20

This deterioration in short‐term earnings losses was not observed

  • utside manufacturing

Short‐term earnings losses, 1979‐2008

e) Men: Outside manufacturing f) Women: Outside manufacturing 10 10 ‐20 ‐10 ‐20 ‐10 ‐50 ‐40 ‐30 ‐50 ‐40 ‐30 ‐60 79 82 85 88 91 94 97 00 03 06 ‐60 79 82 85 88 91 94 97 00 03 06

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SLIDE 21

Like short‐term earnings losses, long‐term earnings losses responded to labour market tightness g

Long‐term earnings losses of displaced workers earning at least $10,000 in year t‐1, 1979‐2004.

a) Men: All industries b) Women: All industries Narrow sample: log Y Narrow sample:Y Narrow sample: log Y Narrow sample: Y 20 Narrow sample:Y Broad sample:Y

%

20 Narrow sample: Y Broad sample: Y

%

‐40 ‐20 ‐40 ‐20 ‐60 40 79 82 85 88 91 94 97 00 03 ‐60 40 79 82 85 88 91 94 97 00 03

21

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SLIDE 22

Long‐term earnings losses of displaced workers with a stable labour market attachment exceeded those observed in the aggregate

Long‐term earnings losses of displaced workers with stable labour market attachment, 1989‐2004

a) Men: stable labour market attachment b) Women: stable labour market attachment a) Men: stable labour market attachment b) Women: stable labour market attachment Narrow sample: log Y Narrow sample:Y Broad sample:Y

%

Narrow sample: log Y Narrow sample: Y Broad sample: Y

%

10 20 p 10 20 p ‐40 ‐30 ‐20 ‐10 ‐40 ‐30 ‐20 ‐10 ‐60 ‐50 89 91 93 95 97 99 01 03 ‐60 ‐50 89 91 93 95 97 99 01 03

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SLIDE 23

Even during the tight labour markets of the early 2000s, high‐seniority laid‐

  • ff workers experienced long‐term losses of at least 10%

Long‐term earnings losses of high‐seniority workers, 1989‐2004

) Hi h i it d) Hi h i it c) High‐seniority men d) High‐seniority women 10 20 10 20 ‐20 ‐10 ‐20 ‐10 50 ‐40 ‐30 50 ‐40 ‐30 ‐60 ‐50 89 91 93 95 97 99 01 03 ‐60 ‐50 89 91 93 95 97 99 01 03

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Measured short‐term earnings declines (from t‐1 to t+1) of displaced manufacturing workers worsened from 1998‐99 to 2005‐06

Average short-term earnings changes (log points) of displaced manufacturing workers 1998-99 2005-06 1998-99 2005-06 Men Women All (25-54)

  • 0.124
  • 0.294
  • 0.239
  • 0.389

Aged 25-34

  • 0 059
  • 0 187
  • 0 189
  • 0 323

Aged 25-34

  • 0.059
  • 0.187
  • 0.189
  • 0.323

Aged 35-44

  • 0.118
  • 0.313
  • 0.182
  • 0.364

Aged 45-54

  • 0.256
  • 0.389
  • 0.391
  • 0.465

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SLIDE 25

Part of the deterioration resulted from compositional effects …

Profile of displaced manufacturing workers 1998-99 2005-06 1998-99 2005-06 % % % % Men Women Aged 25-34 40.3 34.5 34.2 25.3 Aged 35-44 38.0 33.9 39.8 39.9 Aged 45-54 21.7 31.6 25.9 34.8 <=5 years of seniority 83.4 71.2 79.1 68.6 >5 years of seniority 16.6 28.8 20.9 31.4 Ontario 34.3 44.1 35.5 46.8 Found job in manufacturing 48.1 43.2 47.3 36.3

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… whose importance varied across segments of the earnings changes distribution for men …

Deterioration of short‐term earnings changes between 1998‐1999 and 2005‐2006, workers laid‐off from manufacturing from manufacturing FFL decomposition results Percentile 10th 25th 50th 75th 90th I M

  • I. Men

Measured change

‐0.1352 ‐0.1912 ‐0.1391 ‐0.1666 ‐0.2509

in [lnYt+1 ‐ lnYt‐1]

Composition effects attributable to:

Age

‐0.0179 ‐0.0110 ‐0.0105 ‐0.0114 ‐0.0105

Province

‐0.0479 ‐0.0487 ‐0.0297 ‐0.0225 ‐0.0165

Marital status

‐0.0024 ‐0.0013 ‐0.0006 ‐0.0010 ‐0.0014

Seniority

‐0.0546 ‐0.0420 ‐0.0378 ‐0.0537 ‐0.0952

∆Union coverage

‐0.0022 ‐0.0011 ‐0.0008 ‐0.0001 0.0001

∆Firm sizes

‐0.0014 ‐0.0008 ‐0.0023 ‐0.0033 ‐0.0062

∆Industries

‐0.0383 ‐0.0304 ‐0.0115 ‐0.0047 0.0044 Total explained ‐0.1646 ‐0.1352 ‐0.0931 ‐0.0968 ‐0.1253

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Total explained 0.1646 0.1352 0.0931 0.0968 0.1253

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SLIDE 27

… as well as for women

Deterioration of short‐term earnings changes between 1998‐1999 and 2005‐2006, workers laid‐off from manufacturing FFL decomposition results Percentile 10th 25th 50th 75th 90th

  • II. Women
  • II. Women

Measured change

‐0.1731 ‐0.2348 ‐0.1485 ‐0.2011 ‐0.3434

in [lnYt+1 ‐ lnYt‐1]

Composition effects attributable to:

Age

0 0113 0 0129 0 0085 0 0151 0 0043

Age

‐0.0113 ‐0.0129 ‐0.0085 ‐0.0151 ‐0.0043

Province

‐0.0432 ‐0.0393 ‐0.0185 ‐0.0045 0.0027

Marital status

0.0005 0.0024 ‐0.0016 ‐0.0036 ‐0.0014

Seniority

‐0.0510 ‐0.0432 ‐0.0399 ‐0.0589 ‐0.1033

∆U i

0 0410 0 0083 0 0050 0 0098 0 0108

∆Union coverage

‐0.0410 ‐0.0083 ‐0.0050 ‐0.0098 ‐0.0108

∆Firm sizes

0.0047 0.0031 0.0071 0.0030 0.0014

∆Industries

‐0.0967 ‐0.0688 ‐0.0274 ‐0.0024 0.0068 Total explained ‐0.2380 ‐0.1669 ‐0.0940 ‐0.0913 ‐0.1089

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  • V. CONCLUSION
  • V. CONCLUSION
  • 1. Canadians were no more at risk of losing their job during the
  • 1. Canadians were no more at risk of losing their job during the

mid‐2000s than during the late 1970s di l id l i d b

  • 2. Post‐displacement paid employment rates increased by 10

percentage points for women from the late 1970s to the mid‐2000s

  • 3. Short‐term earnings losses were sensitive to labour market

tightness but displayed no trend

  • 4. Workers with stable labour market attachment and high‐seniority

workers experienced long‐term losses of at least 10%

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SLIDE 29
  • V. CONCLUSION
  • V. CONCLUSION
  • 5 From the late 1990s to the mid‐2000s measured short‐
  • 5. From the late 1990s to the mid‐2000s, measured short‐

term earnings changes of displaced manufacturing workers deteriorated sharply. Within the bottom half of the (log) h d b f h d earnings changes distribution, most of this deterioration can be accounted for by compositional effects

  • 6. Limitations:

– Average effects: layoff rates may have risen for some sub‐groups – No controls for workers’ education

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SLIDE 30
  • V. CONCLUSION
  • V. CONCLUSION
  • 7. Despite these limitations, our results show that:
  • 7. Despite these limitations, our results show that:

– In the aggregate, economic insecurity due to job loss has not increased in Canada over the last 3 decades in Canada over the last 3 decades – Long‐term earnings losses of high‐seniority workers are substantial even in periods of tight labour markets even in periods of tight labour markets

  • 8. Whether the deterioration of short‐term earnings changes
  • f displaced manufacturing workers will lead to a
  • f displaced manufacturing workers will lead to a

deterioration in their long‐term earnings changes remains to be seen.

30

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SLIDE 31

APPENDIX

31

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SLIDE 32

Both LWF and LFS show no upward trend in layoff rates

Layoff rates (permanent and temporary layoffs), workers aged 15 to 64, LWF vs LFS, 1978‐2008

35.0 40.0 45.0

%

20.0 25.0 30.0

LWF LFS

5.0 10.0 15.0

Source; Longitudinal Worker File; Labour Force Survey

0.0 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 32

Source; Longitudinal Worker File; Labour Force Survey.

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SLIDE 33

Manufacturing firms adjusted by cutting hiring

Percentage of employees aged 15 to 64 starting jobs with a new employer, by industry, 1991 to 2008

25.0 30.0

%

10.0 15.0 20.0 0.0 5.0 199119921993199419951996199719981999200020012002200320042005200620072008 Source: Longitudinal Worker File manufacturing

  • ther industries

all industries 33

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SLIDE 34

The % of workers separating from firms did not trend upwards over the last 3 decades

Percentage of employees aged 15 to 64 leaving firms due to quits, layoffs or other reasons, 1976 to 2011

25.0 30.0

%

10 0 15.0 20.0 0.0 5.0 10.0 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

Source: Longitudinal Worker File and Labour Force Survey

197 197 198 198 198 198 198 199 199 199 199 199 200 200 200 200 200 201 LFS LWF

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SLIDE 35

ACQUISITION “ERASING” A TRUE MASS EMPLOYMENT DECLINE (DROP OF 30%+) (DROP OF 30%+)

Home Depot existed in 1991 and 1992 AND buys Canadian Tire in 1992 or afterwards: MASS LAYOFF DISAPPEARS 1991 1992 1993 1994 1995 1996 1997 1998 1991 1992 1993 1994 1995 1996 1997 1998 Canadian Tire 100 50 50 50 50 50 50 50 Home Depot 1000 1000 1000 1000 1000 1000 1000 1000 Home Depot 1000 1000 1000 1000 1000 1000 1000 1000 New firm 1100 1050 1050 1050 1050 1050 1050 1050

35

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SLIDE 36

DIVESTITURE “CREATING” FALSE MASS EMPLOYMENT DECLINE

Canadian Tire (CT) sells half of its stores to Home Depot in 1992 Canadian Tire (CT) sells half of its stores to Home Depot in 1992 AND all CT employees involved in the divestiture are re-hired by HD 1991 1992 1993 1994 1995 1996 C di Ti 100 50 50 50 50 50 Canadian Tire 100 50 50 50 50 50 Home Depot 1000 1050 1050 1050 1050 1050 New firm

  • ==> If CT retains its LBRID, a FALSE mass layoff will appear in LWF-LEAP8310

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