Public and cultural services play an essential role in the resilience of cities

The massive closures and layoffs hitting large manufacturing companies – whether because of the competition from low-wage countries or of automation – obviously have serious consequences for the dismissed workers.

However, the cities that house these businesses suffer badly as well. What factors strengthen the resilience of cities following closures or mass layoffs?

In our study of the impacts of large plant closures and downsizingwe found that over the past 20 years, the Canadian cities hardest hit by these events have experienced slower population growth, particularly among youth and working-age people.

These effects, however, have been limited in cities where public and cultural services are an established and vital aspect of community culture. Public and cultural services therefore seem to contribute to the resilience of cities.

Snowball effects of mass layoffs

Since the early 1990s, economists have studied the impact of large factory closures and mass layoffs on laid-off workers. The results show that these economic shocks harm the persons concerned in almost all aspects of their lives: they lead to a drop in income for them and their children when they reach adulthood, an increase in the probability of being unemployed, a longer period of unemployment, a decrease fertility and an increase in the divorce rate.

But the impact of mass layoffs and large factory closures on cities’ economies is more debated.

According to some studiesthe overall job losses are greater than the number of jobs initially lost. This is explained by the snowball effect: the closures of large factories lead to the bankruptcy of local suppliers or other companies that depend on them.

According to other studiespart of the job losses is compensated by those created in local companies already in place or new.

In our recent study of Canadian cities, we found that of the approximately 53,000 manufacturing establishments active in 2003, nearly 4,000 of those with more than 50 employees had disappeared by 2017.

In addition, 1,200 of them had laid off at least 30% of their workforce. In total, almost a third of manufacturing jobs from 2003 had disappeared by 2017, and many of them had not been replaced.

The situation varies by Canadian province. Quebec, Ontario and the Atlantic provinces were much harder hit than the western provinces. And there are also differences between cities within the same province.

We compared the demographic changes in cities where the manufacturing sector experienced a lot of job losses to what happened in cities where there were few losses. We also took into account characteristics that vary greatly between cities, such as their initial size, their initial proportion of young residents, their climate and their location in Canada.

Factory closures lead to an aging population

We have seen that major factory closures and mass layoffs are stunting population growth in the hardest-hit cities. The negative effects are concentrated among people of working age (20-54 years) and young people (0-19 years).

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 look for jobs elsewhere, and they leave with their children when they have any.

Immigrants and single people are also more likely to leave cities affected by labor market shocks. This is because immigrants are used to starting over, while single people need not worry about disrupting their children’s school or social life.

Finally, we observed that cities with a higher share of the population initially employed in education, health care, and social assistance experienced less demographic decline as a result of the shutdown and massive layoffs in large manufacturing companies. The same applies to those with a strong initial presence of cultural services.

Public and cultural services strengthen the resilience of cities by reducing the consequences of closures. Our ongoing research does not allow us to determine the reasons for this, and the phenomenon is not not yet fully understood. But the first results show that education, health and social assistance services are particularly effective in retaining foreign workers, while cultural activities particularly retain people of working age, especially university graduates.

This suggests that these services meet the needs of different types of citizens, and that cities that have them are more likely to retain them if they lose their jobs. At a time when public and cultural services are under great pressure due to Covid-19, their preservation could be one of the elements that allow cities to resist future crises.