The Heterogeneous Impacts of Job Displacement: Evidence from Canadian Job Separation Records

Last updated: November 2024

When estimating earnings losses upon job separation, existing strategies focus on separations in mass layoffs to distinguish involuntary separations from voluntary separations. We revisit the measurement of the sources and consequences of involuntary separations using Canadian job separation records. We refine existing strategies and find that only a quarter of mass-layoff separations are indeed layoffs. Isolating mass-layoff separations that reflect involuntary displacement, we find twice the earnings losses relative to existing estimates. We also uncover significant heterogeneity in losses for separations with different reasons and timing, ranging from 10% for quits after a mass layoff to 60% for layoffs before it. Our findings are relevant for quantitative models that take earnings loss estimates as key inputs to discipline parameters, analyze mechanisms behind these losses, and evaluate policy.