How employers can prepare for and manage the impact of a recession in their workplace

Over the last several months, there’s been much talk about a Canadian recession in 2023. While economists differ on how severe it will be and when it will hit, as we move closer to the new year, the possibility of a recession persists.

The last recession in Canada (economic challenges associated with COVID-19 aside) was 2008/2009. Appreciating that much has changed in 13 years, when we consider how a future economic downturn will impact the workplace, we can look to the past for some insight.

How did the 2008/2009 recession impact employment?

As communicated by Statistics Canada, prior to October 2008, employment levels were at an all-time high and unemployment rates were remarkably low. A year later in October 2009, the average employment loss across Canada was 2.3%, and the unemployment rate rose to 8.6%. As a point of comparison, the Canadian unemployment rate was 13.7% in May 2020 (the highest since 1982).

Other notable statistics from the 2008/2009 recession are as follows:

  • Men aged 25 to 54 were most affected by job losses, with employment declining by 10.8% among men under 25 (6.5% for women of the same age)
  • Manufacturing, construction, natural resources, transportation, warehousing, and retail/ wholesale were the most impacted industries, with manufacturing accounting for over 50% of employment losses
  • Per capita, Alberta experienced the largest losses; BC was on par with the Canadian average
  • Employment losses of Indigenous people between the ages of 25 and 54 and living outside of their communities was double that of non-Indigenous people
  • Single mothers with younger children experienced higher rates (6.8%) of unemployment, while employment of single fathers with younger children increased by 4.6%

In line with the above outcomes, RBC economists Nathan Janzen and Claire Fan believe that a 2023 recession will have a greater impact on lower income Canadians and that the manufacturing sector could again be more significantly impacted than others. They forecast an unemployment rate of around 7% by the end of 2023 (currently at 5.1%).

How are employers preparing for a possible recession?

As indicated by KPMG, 90% of CEOs believe there will be a short (3 to 6 month) recession, and 50% of small to medium sized business leaders expect a mild, short recession. To prepare, some employers are considering (or already putting in place) hiring freezes, downsizing, and pausing major, cost-intensive projects. Although employer concerns may be reasonable, Stephanie Terrill, a KPMG partner, cautions employers against taking a significant downsizing approach – indicating that the risk of not having “employees waiting for them on the other side” could be much greater. Despite some of the steps currently being taken and/or considered, most employers feel confident they can get through the recession.

Aside from downsizing, some employers are looking at other ways they can cut costs. Fast Company noted that this may impact some of the more recently implemented, retention-focused benefits and perks. While the ball is currently within the employee’s court, with a recession looming, that may start to shift back to the employer. Removal of potentially unsustainable incentives may result in less flexibility and, as has recently been seen en masse at Tesla and Twitter, expecting employees to return to the office/worksite.

How will the recession impact employees?

A recent survey by Robert Half found that 25% of employees are looking for work because they’re worried about losing their current jobs. According to the report, younger employees (18 to 24) are most concerned, followed by those between the ages of 25 and 40. In addition to looking for new positions, these employees are also looking at upsizing their skills and considering a different industry altogether.

Also of interest, while quiet quitting may be continuing to gain traction, a past post-recession study found that employees may instead become more productive and work harder during a recession. As we indicated in our September post, however, the reasons behind the quiet quitting movement are multi-faceted and a renewed focus on working harder, longer, faster isn’t necessarily a positive one. Accordingly, historically marginalized folks (women and racialized employees in particular) disproportionately feel they have to work harder than their counterparts.

In contrast, as noted by Great Place to Work, organizations that prioritize and genuinely build a diverse and inclusive culture outperform other organizations by up to 400%. During the 2008/2009 recession, while stock performance declined by nearly 36%, organizations with a diverse workforce including historically marginalized groups and individuals showed an increase of over 14%. Not surprisingly, this research suggests that the experience of employees within an organization impacts how well it performs overall.

How can employers most effectively prepare for/manage a recession?

Whether it materializes or not, there are a number of steps employers can take to help employees prepare for – and weather – its impact.

While it may seem like (and sadly often is) the last thing you need to consider, an intentional focus on your culture is actually the most critical during challenging times. This is the time to focus on and/or create a culture of support, care, and purpose. Despite a more recent focus on salary and benefits, when the economy and organizations are struggling and taking a hit across the board, it is culture that can and should remain strong. In line with your culture and values:

  • Don’t just talk about, but take action to ensure inclusivity and equity
  • Offer purpose and challenge; while you may not be able to cover high costs of training/ conferences, you can provide internal opportunities for employees to learn and grow
  • Communicate proactively, transparently, and honestly about challenges and what you’re doing to address them; when alarming news titles (e.g., Recession will be Severe and Inevitable) are released, talk about them openly with your teams and if/how they may impact your organization
  • Show genuine empathy and provide a safe space for employees to ask questions
  • Check in regularly and focus on teambuilding (now’s not the time to slash that budget)
  • Don’t order folks back to the office; as various studies show, recession might actually make remote work more common  
  • Don’t make arbitrary or hasty decisions about downsizing or slashing costs  
  • Without getting into specifics, as a leader/leadership team, let employees know that you also struggle at times (personally and professionally)

Overall, be human – which includes being vulnerable. As Janice Omadeke, a writer for the Harvard Business Review points out, that’s not just about sharing challenges, but also standing up for your values and beliefs, reaching out, taking the initiative, and creating safe spaces. Some of the most significant contributions and accomplishments in the workplace occur precisely because employees feel heard, safe, trusted, and included.

Let Jouta’s HR Consultants coach you towards supporting your teams with empathy, vulnerability, and compassion.