The world just recovered from the great
recession of 2008-2010 and when Donald Trump was elected, and he moved America
to a more isolationist position, which brought uncertainty to the world. In
2020 COVID-19 hit and the world was faced with economic uncertainty. For those
thinking about retirement, this is one more blow to the idea of retirement.
In 2013 the OECD wrote a report on how to
help workers that were displaced in 14
countries because of the recession to get back to work. These workers were
displaced because of involuntary job loss due to economic factors such as
economic downturns or structural change and the lessons learned may be of interest
as we move out of 2020 into 2021.
The following is from the executive
summary. Some workers have a greater risk of job displacement and are more
likely to experience poor post-displacement outcomes than others. In most of
the countries examined, older workers and those with low education levels have
a higher displacement risk, take longer to get back into work and suffer
greater (and more persistent) earnings losses. While youth also have a higher
risk of displacement than prime-aged workers, they fare better afterwards. Young
workers generally find work relatively quickly after displacement, often in
jobs with greater skill requirements than their previous jobs. Women are
generally no more likely to be displaced than men, once other factors such as
the type of contract they hold before displacement are considered. However,
women are more likely than men to become disconnected from the labour market
and experience longer spells of inactivity after displacement.
The extent of earnings losses after
displacement varies substantially across countries. Earnings losses tend to be low
in the Nordic countries, but much larger in the other countries examined in the
report. Most of the loss in annual earnings after displacement can be
attributed to time spent out of work rather than to lower wage rates upon
re-employment.
In most of the countries examined, men
suffered from bigger and more persistent earnings losses than women, despite
women taking longer, on average, to return to work. Older workers and those who
did not complete secondary school also tend to suffer greater-than-average
earnings losses after displacement.
As well as lower earnings, re-employed
displaced workers are more likely to work in part-time or non-permanent jobs
than prior to displacement, and work shorter hours on average. Other measures
of the quality of post-displacement jobs, such as the incidence of work at
non-standard times, the availability of paid leave and whether workers have
managerial responsibilities, also suggest a decline in job quality after
displacement. Some of this effect may be due to the loss of seniority that
displacement brings, as job quality tends to improve with longer tenure.
Displaced workers tend to use fewer
mathematics, cognitive, interpersonal, and verbal skills and more craft and
physical skills in their pre-displacement jobs than the average employee. This
suggests that they may be ill-equipped to take advantage of job opportunities
in expanding sectors after displacement.
Nevertheless, most displaced workers who
are re-employed find jobs that use similar skills to their pre-displacement
jobs, even if they move to a new occupation or industry. Even among those who
experience a significant change in skill use following displacement, many move
to jobs with higher skill requirements than their former jobs. However, a small
sub-set of workers experience “professional downgrading”, where their new jobs
use far fewer skills than their previous jobs. Those who suffer professional
downgrading experience significant losses in math, verbal, cognitive and
interpersonal skills, modest gains in the use of craft skills and significant
increases in the use of physical skills.
Changes in skill use after displacement
explain some, but not all, of the earnings losses experienced by displaced
workers.
Changes in an industry also appear to matter,
suggesting that the loss of job-specific skills plays a role alongside changes
in the use of generic skills.
These findings help identify several policies
issues to be explored in future work.
First, are
policies that require large firms to provide re-employment services to
displaced workers justified? On the one hand, this report shows that workers in
smaller firms have a much higher risk of displacement than those in larger
firm, suggesting that general active labour market programs are needed. On the
other hand, while displacement is more likely in smaller firms, the number of
displaced workers is generally larger in larger firms, possibly justifying
existing obligations applying to the latter.
Second, what type
of re-employment assistance and training is best suited to help displaced
workers find work? findings in this report suggest that not all displaced
workers may need retraining to find a new, high-quality job as not all changes
in industry or occupation after displacement lead to a significant change in
the skills used at work. However, a small group of displaced workers moves to a job with significantly lower skill requirements, leading to professional
downgrading and more sizeable earnings losses, pointing to the need both for
skills assessment at unemployment entry and either retraining or job-search
support to improve the match between skills and job requirements.
Third, should
helping people return to work quickly, especially for women, older workers and
the low skilled, be a priority to limit earnings losses and skill depreciation
after displacement? The finding, in this report, that earnings losses are
almost entirely due to periods of non-employment rather than lower wages
appears to support this view, except perhaps for the minority of workers
requiring retraining.
Finally, does
knowing in advance about displacement make a difference in outcomes relative to
not knowing? This issue is not explored in this report but should be the object
of future analysis, notably by looking at countries – such as the United
States, with its WARN Act (Worker Adjustment and Retraining Notification Act) –
which require advance notification to workers affected by economic dismissals.
