100% Sources of Displaced Workers’ Long-Term Earnings Losses
Marta Lachowska, Alexandre Mas, Stephen A. Woodbury
We estimate the earnings losses of a cohort of workers displaced during the Great Recession and decompose those long-term losses into components attributable to fewer work hours and to reduced hourly wage rates. We also examine the extent to which the reduced earnings, work hours, and wages of these displaced workers can be attributed to factors specific to pre- and post-displacement employers; that is, to employer-specific fixed effects. The analysis is based on employer-employee linked panel data from Washington State assembled from 2002–2014 administrative wage and unemployment insurance (UI) records.
Three main findings emerge from the empirical work. First, five years after job loss, the earnings of these displaced workers were 16 percent less than those of comparison groups of non-displaced workers. Second, earnings losses within a year of displacement can be explained almost entirely by lost work hours; however, five years after displacement, the relative earnings deficit of displaced workers can be attributed roughly 40 percent to reduced hourly wages and 60 percent to reduced work hours. Third, for the average displaced worker, lost employer-specific premiums account for about 11 percent of long-term earnings losses and nearly 25 percent of lower long-term hourly wages. For workers displaced from employers paying top-quintile earnings premiums (about 60 percent of the displaced workers in the sample), lost employer-specific premiums account for more than half of long-term earnings losses and 83 percent of lower long-term hourly wages.
...DISPLACED WORKERS’ LONG-TERM EARNINGS LOSSES
Stephen A. Woodbury
Working Paper 24217
NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138
For comments on an earlier draft, we are grateful to Katharine Abraham, David Card, Henry
Farber, Patrick Kline, Pawel Krolikowski, Peter Kuhn, Matthew...
99% Long-Term Effects of Job Displacement: Evidence from the Panel Study of Income Dynamics
Ann Huff Stevens
This paper measures the long-term wage and earnings losses of workers who lose jobs due to plant closings and layoffs, using a fixed-effects estimator to control for unobserved worker characteristics and longitudinal data from the Panel Study of Income Dynamics. The results show large and persistent effects of displacement on average, with earnings and wages falling by 25 and 12 percent in the year after job loss. Six or more years later, earnings and wages remain reduced by approximately nine percent. Multiple job losses are responsible for much of this persistence. Those workers who avoid subsequent displacements experience more rapid recovery, with earnings and wage reductions of one and four percent six or more years after displacement. These multiple job losses are not heavily concentrated among any identifiable group of workers, but instead affect the recovery patterns of workers with a variety of characteristics.
...DISPLACEMENT: EVIDENCE FROM THE PANEL STUDY OF INCOME DYNAMICS
Ann Huff Stevens
Working Paper 5343
NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 November 1995
I am grateful to Gary Solon, Charles Brown, Marianne Page, participants in the University of Michigan labor economics seminar, and three anonymous referees for many helpful comments on this work. This...
99% Layoffs and Lemons
Robert Gibbons, Lawrence Katz
In this paper we provide theoretical and empirical analyses of an asymmetric-information model of layoffs in which the current employer is better informed about its workers' abilities than prospective employers are. The key feature of the model is that when firms have discretion with respect to whom to lay off, the market infers that laid-off workers are of low ability. Since no such negative inference should be attached o workers displaced in a plant closing, our model predicts that the postdisplacement wages of otherwise observationally equivalent workers will be higher for those displaced by plant closings than for those displaced by layoffs. An extension of our model predicts that the average postdisplacement unemployment spell of otherwise observationally equivalent workers will be shorter for those displaced by plant closings than for those displaced by layoffs. In our empirical work, we use data from the Displaced Workers Supplements in the January 1984 and 1986 Current Population Surveys. We find that the evidence (with respect to both re-employment wages and postdisplacement unemployment duration) is consistent with the idea that laid off workers are viewed less favorably by the market than are those losing jobs in plant closings. Our findings are much stronger for workers laid off from jobs where employers have discretion over whom to lay off.
...Displaced Workers Supplements. Financial support from the following sources
also is gratefully acknowledged: National Science Foundation grant SES 8809200 (both authors); the Industrial Relations Section at Princeton
University (Gibbons); and an NBER Olin Fellowship in Economics (Katz). This
paper is part of NBER's research program in Labor Studies. Any opinions
expressed are those of the authors...
99% Microsoft Word - Munnell Sass Zhivan.doc
...the Displacement of Older Workers Increased?
Alicia H. Munnell, Steven A. Sass, Mauricio Soto, and Natalia A. Zhivan
Center for Retirement Research at Boston College
Prepared for the 8th Annual Joint Conference of the Retirement Research Consortium
“Pathways to a Secure Retirement”
August 10-11, 2006
The research reported herein was pursuant to a grant from the U.S. Social...
99% Short-run Effects of Parental Job Loss on Child Health
Jessamyn Schaller, Mariana Zerpa
Recent research suggests that parental job loss has negative effects on children's outcomes, including their academic achievement and long-run educational and labor market outcomes. In this paper we turn our attention to the effects of parental job loss on children's health. We combine health data from 16 waves of the Medical Expenditure Panel Survey, which allows us to use a fixed effects specification and still have a large sample of parental job displacements. We find that paternal job loss is detrimental to the physical and mental health of children in low-socioeconomic status (SES) families, increasing their incidence of injuries and mental disorders. We separately find that maternal job loss leads to reductions in the incidence of infectious illness among children in high-SES families, possibly resulting from substitution of maternal care for market-based childcare services. Increases in public health insurance coverage compensate for a large share of the loss in private coverage that follows parental displacement, and we find no significant changes in routine or diagnostic medical care.
...displacement for workers and their
Though a substantial literature documents the effects of displacement on outcomes such
as earnings, employment, health, and fertility for displaced workers, less is known about the
consequences of displacement for another group of potential victims—the children of displaced workers. Given that job displacement causes changes in family income, parental...
99% The Changing Face of Job Loss in the United States, 1981-1993
Henry S. Farber
I examine changes in the incidence and consequences of job loss by reported cause between 1981 and 1993 using data from Displaced Workers Surveys (DWS), conducted as part of the Current Population Survey (CPS) in even years since 1984. The overall rate of job loss is up somewhat in the 1990s. The increase in job loss is larger for older and more educated workers, but younger and less-educated workers continue to have the highest rates of job loss. Some significant changes are also found in the rate of job loss by reported reason. Next I examine the consequences of displacement for several post- displacement labor market outcomes, including the probability of employment, full-time/part-time status, the change in earnings, job stability, and self-employment status. The adverse consequences of job loss, which have always been substantial, do not appear to have changed systematically over time. More educated workers suffer less economic loss relative to income due to displacement than do the less educated. Self-employment appears to be an important response to displacement, and older workers and the more educated are more likely to turn to self-employment.
...due to displacement than do the less educated. Self-employment appears to be an important response to displacement, and older workers and the more educated are more likely to turn to self-employment.
Henry S. Farber Industrial Relations Section Firestone Library Princeton University Princeton, NJ 08544 and NBER
The Changing Face of Job Loss in the United States, 1981-1993
Henry S. Farber
99% Parental Income Shocks and Outcomes of Disadvantaged Youth in the United States
Marianne Page, Ann Huff Stevens, Jason Lindo
in The Problems of Disadvantaged Youth: An Economic Perspective, Jonathan Gruber, editor
...displaced workers experience substantive long- lasting
reductions in earnings, and they argue that layoﬀs and firm closings can be
thought of as exogenous employment shocks after conditioning on predisplacement earnings. Our estimation strategy compares groups of individuals
whose families had the same levels of permanent income prior to a period
when some of the family heads were displaced. In...
99% The Costs of Worker Displacement
Daniel S. Hamermesh
This study defines the nature of worker displacement and develops a mechanism for inferring the amount of losses caused by displacement in away that is tied to economic theory. Data from the Panel Study of Income Dynamics are first used to identify the characteristics of displaced workers. After a demonstration that usual methods of evaluating workers' losses cannot provide correct measures of the cost to society, a game--theoretic model determining the amount of firm -- specific investment in workers is developed. As workers'and firms' horizons decrease, such investment will be reduced; this will be exhibited in a flattening of the wage-tenure profile as the date of displacement approaches. Examination of the profile thus provides a test whether firms and workers have good information about impending displacement. Using the PSID data for workers displaced between 1977 and 1981, the study shows there is no significant flattening of the wage-tenure profile in the entire sample. (However, some flattening does occur among unionized workers, and also among workers who are laid-off permanently from a plant that remains open.) This suggests that workers are surprised by displacement, for they continue investing in firm-specific human capital up to the time of displacement. The present value of the worker's share of the lost returns on this investment is around $7000 (1980 dollars) under intermediate assumptions about the real rate of discount, depreciation on such investment and the effect of tenure on the rate of voluntary separation.
...DISPLACEMENT Daniel S. Hamermesh
Working Paper No. 1495
NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 November 1984
Professor of Economics, Michigan State University, and Research Associate, National Bureau of Economics Research. Helpful cocments on earlier versions of the is paper were received from David Card, Carl Davidson, Harry Holzer and participants...
99% The Link between Human Capital, Mass Layoffs, and Firm Deaths
John M. Abowd, Kevin L. McKinney, Lars Vilhuber
in Producer Dynamics: New Evidence from Micro Data, Timothy Dunne, J. Bradford Jensen, and Mark J. Roberts, editors
...displaced workers has typically concentrated on the eﬀects of displacement on worker outcomes (Anderson and Meyer 1994; Bowlus and Vilhuber 2002; Fallick 1996; Jacobson, LaLonde, and Sullivan 1993b; Kletzer 1998; Kuhn and Sweetman
1998; Ruhm 1994; Schoeni and Dardia 1996; Stephens Jr. 2002), which is
also an important subject in the field of Human Resource Management
(Davis, Savage, and Stewart...
99% Do Conflicts Create Poverty Traps? Asset Losses and Recovery for Displaced Households in Colombia
Ana María Ibañez, Andrés Moya
in The Economics of Crime: Lessons for and from Latin America, Rafael Di Tella, Sebastian Edwards, and Ernesto Schargrodsky, editors
...Displaced Households in Colombia
Chapter Authors: Ana María Ibañez, Andrés Moya
Chapter URL: http://www.nber.org/chapters/c11837
Chapter pages in book: (137 - 172)
Do Conflicts Create Poverty Traps?
Asset Losses and Recovery for
Displaced Households in Colombia
Ana María Ibáñez and Andrés Moya
Internal conflicts may entail large asset losses for certain segments of...
99% What Do We Know About Worker Displacement in the U.S.?
Daniel S. Hamermesh
In the United States roughly one-half million workers with 3+ years on the job have become unemployed each year during the 1980s because of plant closings. There is evidence that this represents an increase over earlier periods of similar macroeconomic conditions. Wage cuts within the observed range lower only slightly the probability that a plant will close. The average loss of earnings, due to long spells of post-displacement unemployment and to subsequent reduced wages, is substantial. While minorities suffer an above-average rate of displacement, the earnings losses they experience upon displacement are not disproportionately high. Women and older workers are no more likely than others to become displaced, and their losses are not disproportionate; but workers who have been on the job longer lose more.
and to subsequent reduced wages, is substantial. While minorities
suffer an above-average rate of displacement, the earnings losses
they experience upon displacement are not disproportionately high.
Women and older workers are no more likely than others to become
displaced, and their losses are not disproportionate; but workers
who have been on the job longer lose more.
99% Labor Market Networks and Recovery from Mass Layoffs: Evidence from the Great Recession Period
Judith K. Hellerstein, Mark J. Kutzbach, David Neumark
We measure the impact of labor market referral networks defined by residential neighborhoods on re-employment following mass layoffs. Because networks can only be effective when hiring is occurring, we focus on a measure of the strength of the labor market network that includes not only the number of employed neighbors of a laid off worker, but also the gross hiring rate at that person’s neighbors’ workplaces, as network theory suggests that employed neighbors in a network serve to increase the probability that, for any given job opening, an unemployed job searcher will be hired into that vacancy. We find some evidence that local labor market networks are linked to re-employment following mass layoffs for lower-earning workers, but our strongest evidence shows that networks serve to markedly increase the probability of re-employment specifically at neighbors’ employers, both conditional and unconditional on re-employment itself. This finding is consistent with the specific role that networks play in reducing frictions in the transmission of information in hiring. Moreover, additional evidence provides confirmation of a network interpretation of this evidence: jobs found at neighbors’ employers lead to more persistent employment, higher earnings, and higher tenure. Finally, although overall employment and gross hiring both declined markedly during the Great Recession, we find little evidence of changes during this period in the productivity of networks in helping displaced workers find new jobs.
displacement has long-term adverse consequences on employment and earnings (e.g. Jacobsen et
al., 1993, hereafter JLS; Davis and von Wachter, 2011), and even on mortality (Sullivan and von
Wachter, 2009). Because of this, it is important to identify factors that can help facilitate the reemployment of displaced workers.
In this paper, we explore the role of labor market networks in the re...
99% Trade and Job Loss in US. Manufacturing, 1979-1994
Lori G. Kletzer
in The Impact of International Trade on Wages, Robert C. Feenstra, editor
...job displacement in U.S. manufacturing during the period
1975-94.’ This was a period of increased trade flows, large swings in the
value of the dollar, and falling trade barriers in developing countries.2This
period was also characterized by widespread permanent job loss, particularly in man~facturing.~
Labor reallocation is a likely implication of a move to freer trade, and
there is a sizable...
99% Does Unmeasured Ability Explain Inter-Industry Wage Differentials?
Robert Gibbons, Lawrence F. Katz
This paper provides empirical assessments of the two leading explanations of measured inter-industry wage differentials: (1) true wage differentials exist across industries, and (2) the measured differentials simply reflect unmeasured differences in workers' productive abilities. First, we summarize the existing evidence on the unmeasured-ability explanation, which is based on first-differenced regressions using patched Current Population Survey (CPS) data. We argue that these existing approaches implicitly hypothesize that unmeasured productive ability is equally rewarded in all industries. Second, we construct a simple model in which unmeasured ability in not equally valued in all industries; instead, there is matching. This model illustrates two endogeneity problems inherent in the first-differenced regressions using CPS data: whether a worker changes jobs in endogenous, as is the industry of the new job the worker finds. Third, we propose two new empirical approaches designed to minimize these endogeneity problems. We implement these procedures on a sample that allows us to approximate the experiment of exogenous job loss: a sample of workers displaced by plant closings. We conclude from our findings using this sample that neither of the contending explanations fits the evidence without recourse to awkward modifications, but that a modified version of the true-industry-effects explanation fits more easily than does any existing version of the unmeasured-ability explanation.
...displaced by plant closings. We conclude from our findings using this sample that neither of the contending explanations fits the evidence without recourse to awkward modifications, but that a modified version of the true-industry-effects explanation fits more easily than does any existing version of the unmeasured-ability explanation.
Robert Gibbons Department of Economics MIT
99% Price Displacement
Frederick C. Mills
in The Behavior of Prices, Frederick C. Mills
It was suggested at an earlier point that our present problem
is essentially that of measuring price instability, and a distinction
was made between instability of the price level and internal instability. Internal instability was defined, provisionally, as the
condition which develops when a set of established price relations
is disturbed. One measure of such instability, the index...
99% Assessing Inherent Model Bias: An Application to Native Displacement in Response to Immigration
Giovanni Peri, Chad Sparber
There is a long-standing debate among academics about the effect of immigration on native internal migration decisions. If immigrants displace natives this may indicate a direct cost of immigration in the form of decreased employment opportunity for native workers. Moreover, displacement would also imply that cross-region analyses of wage effects systematically underestimate the consequences of immigration. The widespread use of such area studies for the US and other countries makes it especially important to know whether a native internal response to immigration truly occurs. This paper introduces a microsimulation methodology to test for inherent bias in regression models that have been used in the literature. We show that some specifications have built biases into their models, thereby casting doubt on the validity of their results. We then provide a brief empirical analysis with a panel of observed US state-by-skill data. Together, our evidence argues against the existence of native displacement. This implies that cross-region analyses of immigration's effect on wages are still informative.
...DISPLACEMENT IN RESPONSE TO IMMIGRATION
Giovanni Peri Chad Sparber
WORKING PAPER 16332
NBER WORKING PAPER SERIES
ASSESSING INHERENT MODEL BIAS: AN APPLICATION TO NATIVE DISPLACEMENT IN RESPONSE TO IMMIGRATION
Giovanni Peri Chad Sparber
Working Paper 16332 http://www.nber.org/papers/w16332
NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 September 2010
99% Advance Notice Provisions in Plant Closing Legislation: Do They Matter?
Ronald G. Ehrenberg, George H. Jakubson
This paper evaluates the cases for and against plant closing legislation. In spite of the growth of legislative efforts in the area, there has been surprisingly little effort devoted to analyzing what the effects are of existing plant closing legislation, of provisions in privately negotiated collective bargaining agreements that provide for advance notice in case of plant shutdowns and/or layoffs, and of voluntary employer provision of advance notice. The paper summarizes the results of previous research, and our own empirical analyses that used the January 1984 Bureau of Labor Statistics Survey of Displaced Workers, on the effects of advance notice on displaced workers' durations of nonemployment and post-displacement earnings. Based upon these findings, implications for public policy are drawn.
...of Displaced Workers, on the effects of advance notice on displaced workers' durations of nonemp!oyment and post-displacement earnings. Based upon these findings, implications for public policy are drawn.
Ronald G. Ehrenberg School of Industrial and
Labor Relations Cornell University Ithica, NY 14851-0952
George H. Jakubson School of Industrial and
Labor Relations Cornell University Ithica, NY...
99% Reconsidering the Consequences of Worker Displacements: Firm versus Worker Perspective
Aaron B. Flaaen, Matthew D. Shapiro, Isaac Sorkin
Prior literature has established that displaced workers suffer persistent earnings losses by following workers in administrative data after mass layoffs. This literature assumes that these are involuntary separations owing to economic distress. This paper examines this assumption by matching survey data on worker-supplied reasons for separations with administrative data. Workers exhibit substantially different earnings dynamics in mass layoffs depending on the rea- son for separation. Using a new methodology to account for the increased separation rates across all survey responses during a mass layoff, the paper finds earnings loss estimates that are surprisingly close to those using only administrative data.
FIRM VERSUS WORKER PERSPECTIVE
Aaron B. Flaaen
Matthew D. Shapiro
Working Paper 24077
NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138
Thanks to Pawel Krolikowski, Margaret Levenstein, Kristin McCue, Luigi Pistaferri, Melanie
Wallskog, Dan Weinberg and seminar participants at the...
99% Mortality, Mass-Layoffs, and Career Outcomes: An Analysis using Administrative Data
Daniel Sullivan, Till von Wachter
This paper uses administrative data on quarterly employment and earnings matched to death records to estimate the effects of job displacement on mortality. We find that job displacement leads to a 15-20% increase in death rates during the following 20 years. If such increases were sustained beyond this period, they would imply a loss in life expectancy of about 1.5 years for a worker displaced at age 40. These results are robust to extensive controls for sorting and selection, and are consistent with estimates of the effects of job loss on mortality pooling displaced workers and stayers that are not affected by selective job displacement. To examine the channels through which mass layoffs raise mortality, we exploit the panel nature of our data -- covering over 15 years of earnings -- to analyze the correlation of long-run career outcomes, such as the mean and standard deviation of earnings, with mortality at the individual and group level, something not possible with typical data sets. Our findings suggest that factors correlated with a decrease in mean earnings and a rise in standard deviation of earnings have the potential to explain an important fraction of the effect of a job displacement on mortality.
...displaced at age
40. These results are robust to extensive controls for sorting and selection, and are consistent with estimates of the effects of job loss on mortality pooling displaced workers and stayers that are not affected by selective job displacement. To examine the channels through which mass layoffs raise mortality, we exploit the panel nature of our data -- covering over 15 years of...
99% Trade Sensitivity, Technology, and Labor Displacement
John T. Addison, Douglas A. Fox, Christopher J. Ruhm
We study the relationship between international trade, technology, and the probability and consequences of job displacement, using data on displaced workers as well as those at risk of job dislocation for 1984-86 and 1989-91. Workers employed in industries with elevated import shares and high levels of investment in computers appear to have increased rates of job loss, with the results for export penetration varying on the time period examined. These risks do not, however, translate into unfavorable postdisplacement labor market outcomes. Indeed, there is some evidence that individuals displaced from export-oriented sectors have fewer adjustment problems than the generality of dislocated workers, while those terminated from sectors investing heavily in computer technologies are more likely to retain health insurance coverage. That being said, our findings are frequently sensitive to the choice of specifications and time periods.
John T. Addison Douglas A. Fox Christopher J. Ruhm
Working Paper 5621
NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 June 1996
We would like to thank Eli Berman and Lori Kletzer for helpful comments on an earlier version of this paper. This paper is part of NBER's research programs in Labor Studies and International Trade and Investment. Any...