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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Job displacement in Canada and its consequences

This chapter examines the prevalence and consequences of job displacement in Canada. Overall labour market performance has been relatively strong in recent years, due both to a longer-run trend improvement and greater resilience to the global financial crisis. Nonetheless, structural adjustment pressures are quite strong in the labour market and 2.2% of employees with at least one year of job tenure were displaced annually during 2000-10. Displaced workers are a very diverse group, but certain workforce groups are over-represented among them, including men, less-educated and blue-collar workers. There are significant adjustment costs associated with displacement, including the earnings losses associated with the time required to become re-employed and the lower wage on average in the new job. These losses are especially large for older and long-tenured workers. One source of these losses is that displaced workers sometimes become re-employed in different occupations that do not make full use of their skills.

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