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Earnings Losses of Displaced Workers: Canadian Evidence from a Large Administrative Database on Firm Closures and Mass Layoffs

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  • Frenette, Marc
  • Morissette, René
  • Zhang, Xuelin

Abstract

Using Statistics Canada’s Longitudinal Worker File, we document short-term and long-term earnings losses for a large (10%) sample of Canadian workers who lost their job through firm closures or mass layoffs during the late 1980s and the 1990s. Our use of a nationally representative sample allows us to examine how earnings losses vary across age groups, gender, industries and firms of different sizes. Furthermore, we conduct separate analyses for workers displaced only through firm closures and for a broader sample displaced either through firm closures or mass layoffs. Our main finding is that while the long-term earnings losses experienced on average by workers who are displaced through firm closures or mass layoffs are important, those experienced by displaced workers with considerable seniority appear to be even more substantial. Consistent with findings from the United States by Jacobson, Lalonde and Sullivan (1993), high-seniority displaced men experience long-term earnings losses that represent between 18% and 35% of their pre-displacement earnings. For their female counterparts, the corresponding estimates vary between 24% and 35%.

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File URL: http://www.clsrn.econ.ubc.ca/workingpapers/CLSRN%20Working%20Paper%20no.%2042%20-%20Frenette,%20Morissette%20and%20Zhang.pdf
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Bibliographic Info

Paper provided by Vancouver School of Economics in its series CLSSRN working papers with number clsrn_admin-2009-51.

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Length: 38 pages
Date of creation: 25 Sep 2009
Date of revision: 25 Sep 2009
Handle: RePEc:ubc:clssrn:clsrn_admin-2009-51

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Web page: http://www.clsrn.econ.ubc.ca/

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Keywords: Layoffs; Job Losses; Employment; Worker Displacement; Earnings Losses;

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References

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  1. Vivian H. Hamilton & Philip Merrigan & Éric Dufresne, 1997. "Down and out: estimating the relationship between mental health and unemployment," Health Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 397-406.
  2. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
  3. Gibbons, R. & Katz, L.F., 1989. "Layoffs And Lemons," Working papers 531, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Martin Browning & Thomas Crossley, 1996. "Unemployment Insurance Benefit Levels and Consumption Changes," Discussion Papers 96-11, University of Copenhagen. Department of Economics.
  5. Thomas F. Crossley & Stephen R. G. Jones & Peter Kuhn, 1994. "Gender Differences in Displacement Cost: Evidence and Implications," Journal of Human Resources, University of Wisconsin Press, vol. 29(2), pages 461-480.
  6. Kerwin Kofi Charles & Melvin Stephens Jr., 2001. "Job Displacement, Disability, and Divorce," NBER Working Papers 8578, National Bureau of Economic Research, Inc.
  7. Baker, Michael, 1997. "Growth-Rate Heterogeneity and the Covariance Structure of Life-Cycle Earnings," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 338-75, April.
  8. Melvin Stephens, 2002. "Worker Displacement and the Added Worker Effect," Journal of Labor Economics, University of Chicago Press, vol. 20(3), pages 504-537, July.
  9. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March.
  10. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
  11. Bruce C. Fallick, 1995. "A review of the recent empirical literature on displaced workers," Finance and Economics Discussion Series 95-14, Board of Governors of the Federal Reserve System (U.S.).
  12. Lori G. Kletzer, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 115-136, Winter.
  13. Jonathan Gruber, 1994. "The Consumption Smoothing Benefits of Unemployment Insurance," NBER Working Papers 4750, National Bureau of Economic Research, Inc.
  14. Stevens, Ann Huff, 1997. "Persistent Effects of Job Displacement: The Importance of Multiple Job Losses," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 165-88, January.
  15. Denise J. Doiron, 1995. "Lay-Offs as Signals: The Canadian Evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 28(4a), pages 899-913, November.
  16. Morissette, Rene, 2004. "Have Permanent Layoff Rates Increased in Canada?," Analytical Studies Branch Research Paper Series 2004218e, Statistics Canada, Analytical Studies Branch.
  17. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 2-20.
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Citations

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Cited by:
  1. Morissette, René & Ostrovsky, Yuri, 2009. "How Do Families and Unattached Individuals Respond to Layoffs? Evidence from Canada," CLSSRN working papers clsrn_admin-2009-49, Vancouver School of Economics, revised 25 Sep 2009.
  2. Coelli, Michael B., 2011. "Parental job loss and the education enrollment of youth," Labour Economics, Elsevier, vol. 18(1), pages 25-35, January.
  3. Danny Leung & Alexander Ueberfeldt, 2008. "Human Capital Risk and the Firmsize Wage Premium," Working Papers 08-33, Bank of Canada.
  4. Zhang, Xuelin, 2008. "The Post-childbirth Employment of Canadian Mothers and the Earnings Trajectories of Their Continuously Employed Counterparts, 1983 to 2004," Analytical Studies Branch Research Paper Series 2008314e, Statistics Canada, Analytical Studies Branch.
  5. Chen, Wen-Hao & Morissette, René, 2010. "Have Employment Patterns of Older Displaced Workers Improved Since the Late 1970s?," CLSSRN working papers clsrn_admin-2010-20, Vancouver School of Economics, revised 27 May 2010.
  6. Riddell, W. Craig, 2011. "Unemployment Compensation and Adjustment Assistance for Displaced Workers: Policy Options for Canada," CLSSRN working papers clsrn_admin-2011-31, Vancouver School of Economics, revised 22 Dec 2011.
  7. Riddell, W. Craig, 2009. "Economic Change and Worker Displacement in Canada: Consequences and Policy Responses," CLSSRN working papers clsrn_admin-2009-41, Vancouver School of Economics, revised 22 Jul 2009.
  8. Heather Scott-Marshall, 2010. "The Social Patterning of Work-Related Insecurity and its Health Consequences," Social Indicators Research, Springer, vol. 96(2), pages 313-337, April.
  9. Jones, Stephen, 2012. "The Effectiveness of Training for Displaced Workers with Long Prior Job Tenure," CLSSRN working papers clsrn_admin-2012-3, Vancouver School of Economics, revised 29 Jan 2012.

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