Back to Work: Canada

Improving the Re-employment Prospects of Displaced Workers

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Job displacement (involuntary job loss due to firm closure or downsizing) affects many workers over their lifetime. Displaced workers may face long periods of unemployment and, even when they find new jobs, tend to be paid less than in their prior jobs. Helping them get back into good jobs quickly should be a key goal of labour market policy. This report looks at how this challenge is being tackled in Canada. While the Canadian government uses several measures to prevent unnecessary layoffs, the focus is placed on assisting workers after they have lost their job via the Employment Insurance system and the core labour market programmes operated by the Provinces. Re-employment assistance tailored to meet the specific needs of displaced workers also plays a useful role, but needs to be reinforced so as to start the adjustment process earlier for workers receiving advance notice or a large severance payment and to reach  workers affected by small-scale displacements. Targeted programmes for older displaced workers with long-tenure who are hardest hit have yet to reach a large share of this group.

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Executive summary

Workers who are involuntarily displaced from their jobs, as firms close or downsize in response to fluctuations in demand and production, face substantial economic and social costs. Around 2.2% of Canadian workers with at least one year of tenure are involuntarily displaced every year. About half are re-employed within one year and almost two-thirds within two years. However, many have to accept significant wage cuts and/or an often involuntary shift to part-time or temporary jobs. Older displaced workers face the poorest re-employment prospects, and those with long tenure bear the largest wage losses.

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