Public and cultural services can play a vital role in a city’s resilience
Closures and mass layoffs that can hit large manufacturing companies – whether due to competition from low-wage countries Where because of automation — clearly have significant negative consequences for the redundant workers.
But the cities that house these businesses are also heavily impacted. What factors strengthen the resilience of cities in the face of these types of closures or mass layoffs?
In our study of large plant closures and downsizing, we found that over the past 20 years, the Canadian cities hardest hit by these incidents have experienced slower population growth, particularly among youth and working-age people.
But these effects have been tempered in cities where public and cultural services are an established and vital part of community culture. Public and cultural services seem to foster a city’s resilience.
The snowball effects of mass layoffs
Since the early 1990s, economists have studied the impact of large factory closures and mass layoffs on displaced workers on a variety of fronts. The results show that these economic shocks hurt people in almost every aspect of their lives: they lead to lower incomes for them and their children, a higher risk of unemployment, longer periods of unemployment, lower fertility and a higher divorce rate.
But the impact of mass layoffs and large factory closures on cities’ economies is the subject of more debate.
Some studies find that the overall job losses are even greater than the number of jobs initially lost. It’s because of the snowball effect – large factory closures trigger the failure of local suppliers or other businesses that rely on them.
Other studies find that some of the job losses generated by large plant closures are compensated by new or existing local businesses.
In our recent study of Canadian cities, we document that of approximately 53,000 manufacturing establishments active in 2003, nearly 4,000 of them with more than 50 employees had disappeared by 2017.
another 1,200 of them had lost at least 30% of their workforce. In total, almost a third of manufacturing jobs in 2003 had disappeared by 2017, many of them not having been replaced.
These events varied from one Canadian province to another. Quebec, Ontario and the Atlantic provinces were much harder hit than the western provinces. And there are other differences between cities within provinces.
We then compared demographic changes in cities with high manufacturing job losses to those in cities with low job loss rates. We also took into account that cities differ in several other respects, such as their initial size, their initial proportion of young residents, their climate and their geographical position in Canada.
Factory closures lead to aging urban population
We found that major factory closures and mass layoffs reduced population growth in the hardest-hit cities. The negative effects are concentrated on people of working age (20-54) and young people (0-19).
In other words, a city that deindustrializes becomes a city with an aging population. Indeed, people of working age are more likely to leave after mass layoffs to seek job opportunities elsewhere, and when they do, they often leave with dependent children.
Immigrants and single people are also more likely to leave cities affected by negative labor market shocks. This reflects the fact that immigrants tend to be used to starting from scratch, while single people have no fear of disrupting their children’s school or social life.
Finally, we found that cities with residents working in education, health care, and social support services experienced less population decline following large manufacturing plant closures and mass layoffs. The same goes for cultural services.
Public and cultural services strengthen a city’s resilience by making the effects of closures less painful. The reasons are not yet entirely clear from our ongoing research, nor is the phenomenon well understood. But initial findings indicate that education, health care and social assistance services are particularly useful in retaining migrant workers, while cultural activities act as a magnet for people of working age, especially young people. university graduates.
This suggests that these services meet the needs of various types of citizens – and that cities are likely to retain them if they lose their jobs. At a time when COVID-19 has put cultural and public services under great pressure, their preservation can be an ingredient in ensuring that cities are resilient to future crises.