Educational choices and labour market outcomes in times of crisis

In this article, we estimate the impact of a large negative trade shock on labour market outcomes and educational choices of workers. We exploit the Canadian lumber export crisis beginning in 2007 in a quasi-experimental design. The crisis was sudden and more pronounced in the forestry industry than in comparable industries. We find that the employment probability of forestry industry workers decreased by 3.8 percentage points following the crisis relative to other workers in comparable industries. While one would expect younger forestry workers to return to school in such circumstances, we find that in the first two years following the crisis, unemployed workers did not go back to school. However, going back to school takes time, and after 3 to 4 years, we find that education enrolment increases by 2.9 percentage points, with a stronger effect on younger individuals (7.8 p.p.). This suggests that increases in education enrolment are gradual, as it is easier to drop out than to enrol. Facilitating access to post-secondary institutions for workers who lost their job’s permanently would be a valuable policy intervention.