The Impact of Downsizing on Marginalized Communities

In recent years, corporate downsizing has taken on a troubling new dimension, revealing deep-rooted inequities in the labor market. Economic shocks, from the COVID-19 pandemic to current political and trade-related tensions, have shown how marginalized workers carry a disproportionate share of the burden. Women, racialized individuals, low-wage earners, disabled workers, and immigrants are frequently the first to face job losses as companies streamline their operations and eliminate roles considered nonessential. This pattern raises urgent questions about workplace equity and the broader societal cost of short-term cost-cutting strategies. 

During the height of the COVID-19 crisis, industries such as hospitality, care, and retail were among the hardest hit. In Canada, women—particularly those who are racialized or immigrants—were overrepresented in these sectors, leading to widespread and uneven job losses.^1,2 At the same time, Statistics Canada reported that Black, Indigenous, and immigrant workers were more likely to be in precarious employment, and they experienced slower recoveries as the economy reopened.^3,4 As financial pressures mounted, many companies and institutions scaled back or paused diversity and equity initiatives that had gained momentum following the racial justice movements of 2020.⁵ Even remote work policies, which were intended to offer flexibility, often failed to meet the needs of disabled or immunocompromised employees who required longer-term accommodations.

As we move through 2024 and into 2025, the broader political landscape is adding new layers of complexity. In the United States, conservative leaders have launched direct challenges to Diversity, Equity, and Inclusion (DEI) efforts. States such as Florida and Texas have passed legislation eliminating DEI offices and banning identity-based training.^6,7 Since 2020, there has been a reported 33 percent decline in DEI roles in corporate America.⁵ These actions are beginning to influence Canada, particularly within tech companies, universities, and multinational corporations with cross-border ties. Increasingly, DEI is being framed by critics as divisive or unnecessary, fueling calls for so-called merit-based hiring. This shift puts equity-focused non-profits and Indigenous-led organizations in a precarious position as they face uncertainty around future funding and institutional support.

Meanwhile, economic nationalism is already intensifying these risks. In response to escalating trade tensions with the United States, Canada enacted a 25 percent tariff on a broad range of U.S. goods effective March 13, 2025.⁸ This move marks a significant escalation in bilateral trade friction and could have serious consequences for key Canadian industries such as automotive, agriculture, and energy—sectors that form the economic backbone of rural and Northern communities. These industries also employ a disproportionately high number of Indigenous and racialized workers. With the potential for job losses to reach up to one million across the country if the dispute deepens, marginalized groups stand to bear the brunt of the economic fallout.^9,10

The process of downsizing itself often deepens these structural imbalances. Many companies make decisions based on tenure or perceived role importance, which disadvantages workers from marginalized backgrounds who are more often in junior, newly hired, or “non-core” roles. These may include departments like human resources, legal, communications, or smaller product teams. Research by Alexandra Kalev and Frank Dobbin, involving more than 800 U.S. companies, found that when entire job categories are cut—rather than evaluating individual performance—representation of underrepresented groups in management drops by 9 to 22 percent almost immediately.¹¹ Layoff policies such as “last hired, first fired” also reduce representation, eliminating an estimated 19 percent of white women and 14 percent of Asian men from management positions.¹¹

This disparity is particularly stark in sectors like technology, where women, LGBTQ+ individuals, and racialized employees are more commonly found in functions such as marketing, human resources, or internal DEI efforts. Layoffs in these industries often target contract, entry-level, and lower-tenure roles—jobs disproportionately held by marginalized groups. In Canada, this situation is compounded by evidence that visible minority workers experience high rates of overqualification. For instance, 45 percent of Filipino workers, 24 percent of South Asians, and 23 percent of Black workers are employed in roles that do not match their education or experience, compared to just 10.8 percent of non-minority workers.¹² These dynamics not only reverse gains in workplace diversity but also create a suppressive environment where marginalized employees may fear speaking up, further slowing progress on inclusion.

Addressing these challenges requires a more thoughtful approach to workforce planning. Companies should move away from blanket strategies such as cutting whole departments or rigidly applying seniority-based rules. Instead, they should evaluate performance on a case-by-case basis, recognizing and retaining high performers from all backgrounds. Targeting underperforming managers while being mindful of potential biases in performance evaluations is another way to safeguard diversity without compromising operational effectiveness. These strategies help build a more resilient workforce and demonstrate a commitment to fairness that goes beyond short-term financial metrics.

Ultimately, today’s downsizing trends reveal the complex relationship between economic policy and social justice. As governments and businesses respond to shifting market conditions and political pressures, the goal should be to achieve efficiency without sidelining people who bring innovation, insight, and resilience to the workforce. Investing in targeted retraining programs, mentorship initiatives, and fair redeployment strategies will help ensure that diversity and inclusion are not sidelined, but instead recognized as essential components of long-term, sustainable growth.

-Danielle Selby

About Women in Leadership (WIL): Founded in 2001, WIL delivers inspirational programs that bring women together to collaborate in the development of their leadership skills and create positive change in the future of women’s leadership.  WIL is empowering women and youth through mentorship, leadership forums, and national events, connecting leaders across North America and inspiring systemic change in workplace cultures. The Transforming Workplace Opportunities Initiative is part of WIL’s broader mission to advance women’s leadership and break barriers for BIPOC communities. The Women in Leadership Foundation acknowledges the financial support of Women and Gender Equality Canada to make this initiative possible. Each of us has the power to make a difference. WIL is about working together to get there. www.womeninleadership.ca.

References

1. Statistics Canada, “Immigrant working women hard hit by pandemic,” StatsCan Plus, March 25, 2022. statcan.gc.ca

2. Canadian Centre for Policy Alternatives, “Racialized and Indigenous workers are bearing the brunt of pandemic job loss,” Canadian Centre for Policy Alternatives, January 14, 2021. policyalternatives.ca

3. Statistics Canada, “A labour market snapshot of Black Canadians during the pandemic,” The Daily — Statistics Canada, February 24, 2021. statcan.gc.ca

4. Canadian Centre for Policy Alternatives, “Still struggling: Racialized workers in the post‑pandemic labour market,” Canadian Centre for Policy Alternatives, June 3, 2025. policyalternatives.ca

5. Reyhan Ayas, Paulina Tilly, and Devan Rawlings, “Cutting Costs at the Expense of Diversity,” Revelio Labs, February 7, 2023. reveliolabs.com

6. NBC News, “Map: See which states have introduced or passed anti‑DEI bills,” NBC News, published March 2, 2024. cbc.house.gov

7. ABC News, “Map: The impact of anti‑DEI legislation,” ABC News, April 5, 2024. abcnews.go.com

8. Government of Canada, Department of Finance, “List of products from the United States subject to 25 per cent tariffs effective March 13 2025,” canada.ca, March 13 2025. canada.ca

9. Bank of Canada, “In Focus: Financial Stability Risks in a Changing Global Environment,” Monetary Policy Report, January 29 2025. bankofcanada.ca

10. Jim Wilson, “Tariffs war: Up to 1 million Canadians could lose their job, says expert,” Canadian HR Reporter, February 4, 2025. hrreporter.com

11. Kalev, Alexandra, “How ‘Neutral’ Layoffs Disproportionately Affect Women and Minorities,” Harvard Business Review, July 26, 2016. hbr.org

12. Government of Canada, Employment and Social Development Canada, “Chapter 1: Findings and Recommendations,” Review Task Force on the Employment Equity Act. canada.ca