Applied Research Bulletin - Volume 1, Number 2 (Summer 1995) - July 1995

Job Displacement Can Have Upside

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Many displaced workers get back to work - quickly and smoothly. According to a recent review by Darren Lauzon, over half of displaced men and women found jobs relatively quickly over the 1988-90 period. Nearly half of those starting new jobs experienced an earnings gain.Still, a sizeable portion of both Canadian and U.S. displaced workers experience long jobless spells and persistent earnings losses.

Nearly half of those starting new jobs experienced an earnings gain. Still, a sizeable portion of both Canadian and U.S. displaced workers experience long jobless spells and persistent earnings losses.

In the review, displacement is defined simply as the loss of a job through permanent layoff or plant closure. In the past, the notion of displacement has been associated with a shift from stable employment, defining displaced workers on the basis of expected outcomes, particularly low reemployment chances. However, there is some evidence that the job turnover rate has been increasing. And much of the job changing which takes place occurs within an industry. It is becoming more difficult to decide what should be considered as stable employment and when to decide when an involuntary separation from employment should be classed as displacement. In addition simplifying the definition of displacement gives policy makers an understanding of the whole adjustment process - its successes as well as its failures.

Young, non-unionized, low wage,poorly educated workers in volatile sectors, such as trade and construction, tend to experience disproportionately higher rates of displacement relative to the proportion of jobs they hold in the economy. The majority of displaced workers had held the jobs they lost for less than a year. A large proportion lost jobs in very small firms. At the end of the 1980s, permanent layoffs were less of a problem in Ontario relative to other provinces, especially the Atlantic provinces and B.C. During this period, however, plant closures were increasingly concentrated in Quebec and Ontario.

The experience of displaced workers varies considerably:

• Half of men displaced between 1988-90 started new jobs within 12 weeks; half of women displaced in the same period began new jobs within 25 weeks. Women may experience longer spells between jobs because they have a higher likelihood of withdrawing from the labour market when they lose a job.

• A considerable proportion of men (5%) and women (10%) took more than a year to start new jobs.

• Workers tend to return to sectors from which they were displaced, particularly in sectors where there is a high rate of displacement (construction and trade, for example).

• Women who change sectors following displacement tend to move into service and trade sector jobs, from which there is a high probability of displacement.

• For some workers, repeat layoffs following displacement are a problem. One-quarter to one-third of workers laid off in 1988 and 1991 experienced two or less layoffs in the previous ten years. However, the same proportion of workers experienced six or more layoffs during the same period.

The review raises a critical question. Do public policies need to distinguish between displaced workers and the unemployed in general?

Numerous programs, especially in the United States, have been initiated to help smooth the adjustment process for displaced workers. Results, have been mixed. Although classroom training appears to raise the earnings of participants when reemployed, the increases may not justify the costs involved. Results for on-the-job training are more promising. Job search assistance proved to be a cheap and effective program.

In Canada, certain parts of the former Skills Investment Program had positive impacts on the earnings and employability of displaced workers. However, the results were not as positive for the Canadian Industrial Adjustment Service (IAS). The Program for Older Worker Adjustment has yet to be evaluated.

The review raises a critical question. A considerable number of displaced workers experience smooth adjustments back to work. Do public policies need to distinguish between displaced workers and the unemployed in general?

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