Layoffs cut into wages, retirement income in Canada

OTTAWA – More than half of the Canadians who found a job after a layoff have seen a decrease in their hourly wages, "significantly" affecting their retirement income, a new Statistics Canada report released Friday found.

The study found that Canadians who were laid off in the last two decades were about 60 per cent more likely to suffer a loss of earnings than to experience a gain. Between 2002 and 2006, about 42 per cent experienced a wage loss during that period compared with 26 per cent who experienced a gain, while about a third maintained the same earnings. The same figures were observed between 1993 to 1997.

The Statistics Canada study used data from its Survey of Labour and Income Dynamics from 1993 to 2007, analyzing the effects of layoffs after the economic recession in the early ’90s and the decline in the manufacturing sector in the 2000s.

Wage losses and gains were "generally substantial," the report said, with more than half of the changes in wage exceeding 20 per cent.

While the effects of layoffs during the recent recession remains to be seen, the study’s co-author, Diane Galarneau, said there are many similarities between in those two periods of negative job growth that may apply to this downturn.

"Whether we look at the consequences of the layoffs in the 1990s . . . or the year 2000, the consequences were similar in terms of wage loss, pension coverage and unionization."

The study said the wage losses show that layoffs can have "major negative consequences and affect workers’ standard of living" in the short term, but stresses the effects of losing pension plan coverages are even more significant.

"Employer-sponsored private pension plans are an important component of Canadians’ retirement income," Statistics Canada explained. It said a "sizable portion" of all laid-off workers – 20 per cent – lost their pensions by changing jobs.

The study also noted that laid-off workers were just as likely to be unionized before and after the layoff, suggesting that wage losses experienced by laid-off workers cannot be linked to a shift toward non-unionized positions. They noted, however, that unionized jobs are on average better paid and more likely to provide benefits such as insurance and pension plans.

Of the people who were permanently laid off between 2002 and 2006, about 85 per cent found a new job within a year, compared with about 80 per cent from 1993 to 1997.

The country’s layoff rate for full-time workers declined almost steadily during that same period, dropping to 2.4 per cent in 2007 from 5.5 per cent in the early ’90s.

"This low rate was observed despite the difficulties in the manufacturing sector during the 2000s," it wrote.

Factors including sex, age and education level were "significantly associated" with the probability of being laid off, the report said. In general, men have higher layoff rates than women, they said. Both in 1993 and 2007, men were one and a half times more likely to be laid off.

About 80 per cent of people who were laid off in 2007 were a result of a lack of work, 15 per cent was because their firm went out of business, while 5 per cent of the firms moved.


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