Research summary - Trends in temporary layoffs and recall expectations

Official title: Trends in temporary layoffs and recall expectations
Author of report: Sami Bibi and Eyob Fissuh

Why this study

The study aims to improve our understanding of overall trends in temporary layoffs and use of Employment Insurance (EI). The study focused on the chances of a laid off employee with possible recall making an EI claim. This information will help in assessing firms’ use of EI.

The EI Commissioner for Employers asked for this study to supplement the 2018 to 2019 EI Monitoring and Assessment Report.

What we did

The study examined the trends in temporary layoffs and recall expectations between 1976 and 2018. The study considered 3 key indicators:

1. layoff rate - the number of layoffs divided by total number of employed persons
2. share of temporary layoffs in total layoffs, and
3. expected recall rate - total number of laid off employees with expected recall from their former employer, divided by the total number of respondents

The study accounted for business cycle effects. We used recent time windows in each of a boom and a bust period and compared them to similar windows in the past. For example, the study compares results for the 2008 to 2009 recession to the recessions of the 1990s and 1980s.

However, for expected recall rates, we examined only time windows between trough and the peak phases of the business cycle. This was due to lack of data. Whenever the data allowed, we included results by gender and age group.

The study also assessed the attributes of laid off persons with possible recall. The key attributes included:

• age
• gender
• educational level
• industry, and
• province of residence

The main data source for the study was the master file of Statistics Canada's Labour Force Survey (LFS), 1976 to 2018. We then added data from the Canadian Out-of-Employment Panel Survey. The study also used the Labour Market Program Data Platform, which has 2 linked but distinct components. The first component contains income tax data files from the Canada Revenue Agency. The second component includes EI administrative data from Employment and Social Development Canada.

What we found

Based on the LFS, the total layoff rates in Canada have declined from around 4.0% in 1976 to 2.5% in 2018. Over the same period, the average temporary layoff rates were higher during the recession years. However, temporary layoffs showed smaller, less abrupt increases during recent recessions compared to the previous recessions. As a result, the average layoff rates are lower in recent recessions. The rate for 2008 to 2011 was 0.5% compared to almost 0.8% in 1980 to 1984, and 0.7% in 1990 to 1994.

The temporary layoff rates for women were lower than for men. A significant majority of laid-off employees with recall expectations were men. This may mean that men predominate in the industries/occupations where recall is more common. It does not necessarily mean that employers are less likely to recall laid off women.

There were conflicting findings about how expected recall rate changed over time. Using LFS data, the rate declined from 32% in 1996 to 25% in 2018. However, Record of Employment and Tax data show that the actual recall rate has increased. In 2016, employers recalled 60% of their laid-off employees, compared to just 47% in 1999.

Not all groups were equally represented in the pool of laid off employees with possible recall. Notably, employees with schooling above high school level, but without a university degree, carry a larger part of the burden. The share of workers from the Atlantic provinces in the pool was also high.

What it means

The EI program is under regular review to better support the realities of the current and future labour markets. The findings from this study may inform changes that improve access to EI for laid-off employees. In case of temporary layoffs, EI benefits can play a vital role as a temporary financial bridge to employment recall.

The study also shows how some groups of workers in Canada shoulder a bigger share of the burden of lay-off.

Contact us

Skills and Employment Branch, Labour Market Information Directorate, Policy, Research, Analysis and Geomatics Division

Email: ESDC.NC.SSPB.RESEARCH-RECHERCHE.DGPSS.CN.EDSC@hrsdc-rhdcc.gc.ca