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

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

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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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
Contact details of provider: Web page: http://www.clsrn.econ.ubc.ca/

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  1. Louis S. Jacobson & Robert J. LaLonde & Daniel Sullivan, 1992. "Earnings Losses of Displaced Workers," Upjohn Working Papers and Journal Articles 92-11, W.E. Upjohn Institute for Employment Research.
  2. Martin Browning & Thomas Crossley, 1996. "Unemployment Insurance Benefit Levels and Consumption Changes," Discussion Papers 96-11, University of Copenhagen. Department of Economics.
  3. Melvin Stephens Jr., 2001. "Worker Displacement and the Added Worker Effect," NBER Working Papers 8260, National Bureau of Economic Research, Inc.
  4. 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.
  5. Robert Gibbons & Lawrence Katz, 1989. "Layoffs and Lemons," NBER Working Papers 2968, National Bureau of Economic Research, Inc.
  6. Gruber, Jonathan, 1997. "The Consumption Smoothing Benefits of Unemployment Insurance," American Economic Review, American Economic Association, vol. 87(1), pages 192-205, March.
  7. 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.
  8. Lori G. Kletzer, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 115-136, Winter.
  9. 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.
  10. 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.
  11. 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.
  12. 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.).
  13. Kerwin Kofi Charles & Melvin Stephens, 2004. "Job Displacement, Disability, and Divorce," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 489-522, April.
  14. Jonathan Gruber, 1994. "The Consumption Smoothing Benefits of Unemployment Insurance," NBER Working Papers 4750, National Bureau of Economic Research, Inc.
  15. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March.
  16. Morissette, Rene, 2004. "Have Permanent Layoff Rates Increased in Canada?," Analytical Studies Branch Research Paper Series 2004218e, Statistics Canada, Analytical Studies Branch.
  17. 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.
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