Target store closures: What will happen to 17,600 employees?
Target has said it will set up a $70M trust for its Canadian employees
The collapse of Target in Canada has led to one of the largest private-sector layoffs in recent Canadian history, but some analysts disagree over how the more than 17,000 employees will be absorbed into the workforce.
"These folks were working part-time precarious work, barely at minimum wage, in the retail sector. So they were already at the bottom of the rung of our labour market," says Jim Stanford, economist for the Canadian labour union Unifor.
"Obviously a big announcement like this for people who are already in a precarious situation is going to be a catastrophe."
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But Ian Lee, an assistant professor at Carleton University’s Sprott School of Business, says the impact will be negligible.
"I predict it won't even show up in the unemployment numbers," Lee says. "They'll get reabsorbed over the next two, three, four months."
While the 17,600 employees affected by the closure of 133 stores across Canada face the prospect of finding new employment, Target has said it will make cash contributions of $70 million into an employee trust that will provide a minimum of 16 weeks of compensation, including wages and benefits coverage.
But what happens when those benefits run out? Stanford says the employees will find themselves in a weak market, and that the rules of employment insurance mean many, perhaps most, won't qualify.
"In terms of layoffs, this is gigantic," says Angella MacEwen, a senior economist with the Canadian Labour Congress.
"The labour market has been stagnant for the past four years. Last year, we created fewer than 200,000 jobs — this is 10 per cent of those jobs … cut on a single day. I don't see where the driver of growth is going to be coming from that could absorb that."
Robert Kavcic, a senior economist for BMO, says the Target layoffs is "a pretty big number" when looking at Canadian employment, given that the 17,000-plus figure is typically the amount of jobs created in a given month.
Turnover rate quite high
However, the jobless rate for the retail sector is relatively low — 4.7 per cent for 2014, according to Statistics Canada — and the turnover rate is quite high.
"If there is good news, that kind of employment is pretty easily transferable to somebody else like Walmart … It's not like a factory shutting down and 17,000 people having nowhere to go now," Kavcic says.
"It's not good. But over time it's probably a group that will be absorbed elsewhere in the Canadian economy."
Lee agreed, adding that Target's announcement, by itself, does not tip an economy and that you can't simply take the number of people laid off and add that to unemployment.
"Companies go bankrupt all the time and the resources are redeployed," he says.
Even though Target was losing billions, it was still generating billions in revenue, sales that have to go somewhere, he says.
"When a company fails, those sales don't just 'poof' go into the ether and just disappear and never come back to Canada," he says. "Thecustomerjust drives down the street and goes to Walmart or drives down the street and goes to Canadian Tire. It's intra-industry shifting form one competitor to another."
As for the Target employees, he says many will be absorbed by the American retailer's former Canadian competitors.
"Unless we're assuming they are running with a lot of fat in their organization, and we know from retail they're not, they're running very lean ... that's why most of them will be picked up."
However, Lee did acknowledge that this won't happen instantaneously. And that's a problem for the Target employees, many of whom are part-time, students and newer entrants to the labour market.
"It's going to be a lot harder to qualify for EI for them, so in terms of being able to get the access to any of the training or income support through EI, that's going to be a big challenge," MacEwen says.
But Target employees who do find work eventually may face financial pressures as they wait to start their new jobs.
"A lot of Canadians are living pay cheque to pay cheque and have huge debt load, so I think the impact on those workers and their communities is going to be significant," MacEwen says.