How the COVID recession could change everything
Many temporary layoffs will become permanent, experts say
HALIFAX — Tens of thousands of Atlantic Canadian workers are off the job because of COVID-19.
In May, just under 59,000 workers in the region were on temporary layoff. That's more than one-third of all those unemployed in Atlantic Canada. The previous month, temporary layoffs accounted for nearly half the idled workforce.
How many of those temporary layoffs become permanent is an open question, economists contacted by SaltWire said.
According to Statistics Canada, roughly 45 per cent of layoffs in the last three recessions turned out to be permanent. And of those who were called back, another 15 per cent lost their jobs the following year. The statistics cover the recessions of 198182, 1990-92 and 2008-09.
“If you have a big shock to the economy, one of the ways you can minimize its cost is to try and maintain that job match and avoid the possibility that firms just lay off workers completely,” said Dalhousie University economist Lars Osberg.
“In the financial crisis back a little over 10 years ago, countries like Canada, the U.S. and the U.K., companies had to lay off their workers and, particularly in the U.S., there was quite a long recovery period,” he said. “Germany, on the other hand, employers shortened work weeks and the government topped up wages.
“German unemployment didn't take the big jump up that you saw in the U.S. or U.K., and Germany recovered from that recession pretty quickly.”
SUPPORT PROGRAMS
Fred Bergman, a senior policy analyst with the Atlantic Provinces Economic Council, said some of those who lost jobs in previous recessions wound up becoming self-employed or retired, leaving them with lower incomes. This time, government supports like the Canada Emergency Response Benefit and the Canada Emergency Wage Subsidy will help workers get through layoffs while offering incentives for employers to bring them back.
“We didn't have that in the mix the last three recessions,” Bergman said.
“It depends on whether or not we get a second wave I guess, but right now, you could end up getting more hired back this time around because we have that unique funding.”
Osberg considers the current crisis different from the last recession, after which business and productivity went back to normal. This time, government rules around social distancing and uncertainty about the nature of the virus complicate matters.
“As we reopen the economy . . . they don't get to go back to their old way of doing business,” Osberg said.
“They have to go back to a much changed way of doing business in which there are some really big productivity impacts. It's most easily observed in the restaurant sector, where they have to take out all those tables. The volume of sales in the restaurants could decline by half at least.”
Osberg expects many temporary layoffs in the hospitality sector will become permanent as distancing compounds the problem of closed borders keeping tourists out.
LONG-TERM LAYOFFS
Jim Sentance, an associate professor of economics at the University of Prince Edward Island, expects that province's tourism industry will be vulnerable when it comes to long-term layoffs.
In Charlottetown, a lot of retail and service-based businesses near the harbour depend heavily on cruise ships, which are banned until at least October. A move toward online shopping — evident through Canada Post shipping parcels at record levels — will also hurt retail in general, he said.
“I think one thing to keep in mind is even if current businesses go under, if the infrastructure is there, somebody at some point will come along and buy it up,” he said.
“I don't worry about airlines. Airports aren't being dismantled. The planes are still there.”
Herb Emery, the Vaughan Chair in Regional Economics at the University of New Brunswick, said spending power has been reduced for many during the pandemic and will create further challenges for industries such as service, hospitality and tourism.
In New Brunswick, he said, the Canada Emergency Response Benefit has created a labour challenge, leaving businesses unable to fill positions as they reopen. Looking forward, he anticipates there will be opportunities.
“What I hope provinces are looking at is making sure we have the internet backbone infrastructure and they're connected enough,” he said.
“We probably need to take a hard look at what we are doing with education and training. It's been on autopilot and not really focused on any particular outcome. This may be where you have to be a bit more focused on getting your tech-savvy young people who can work in these different environments and figure out how to communicate globally and not just around the local communities. It's not across the table anymore — it's across the screen.”
AUTOMATION, WORKING REMOTELY
On the technology front, Lynn Gambin, a Memorial University associate professor of economics, sees automation becoming more rampant in some sectors because of COVID-19.
“Some kinds of jobs that people don't require a high level of training for, where it's a routine task that can be automated, we'll likely see that,” she said.
And with more people working remotely from home, Gambin expects many businesses will move away from maintaining physical office spaces. This will lead to permanent layoffs for those whose work is dependent on offices, such as janitorial staff or receptionists.
“How quickly the restrictions are eased will really affect that,” she said.
The longer employers get by with remote work and no offices, the more likely they are to learn to cope without offices.
For the Newfoundland and Labrador tourism sector, Gambin said 2021 will be key, and the factors for success or failure lie largely beyond the province's control.
One thing Newfoundland and Labrador does have control over is containment of the virus. Gambin said that's an advantage.
“It might be a time where businesses in this province are actually in a really good place to take advantage of gaps in the market because we are in such a good place with the low infection rate here and some of our restrictions being eased in a very systematic fashion.”
Another factor beyond anyone's control is the development of a vaccine. Without that, Bergman cautioned, it is hard to envision when that return to normal might happen.