Sources of Displaced Workers' Long-Term Earnings Losses

Authors

Marta Lachowska, W.E. Upjohn Institute for Employment ResearchFollow
Alexandre Mas, Princeton University and National Bureau of Economic ResearchFollow
Stephen A. Woodbury, Michigan State University and W.E. Upjohn Institute for Employment ResearchFollow

Upjohn Author ORCID Identifier

https://orcid.org/0000-0001-9158-2592

https://orcid.org/0000-0002-4474-2415

Publication Date

10-2020

Source

American Economic Review 110(10): 3231-3266

Abstract

We estimate the magnitudes of reduced earnings, work hours, and wage rates of workers displaced during the Great Recession using linked employer-employee panel data from Washington state. Displaced workers' earnings losses occurred mainly because hourly wage rates dropped at the time of displacement and recovered sluggishly. Lost employer-specific premiums explain only 17 percent of these losses. Fully 70 percent of displaced workers moved to employers paying the same or higher wage premiums than the displacing employers, but these workers nevertheless suffered substantial wage rate losses. Loss of valuable specific worker-employer matches explains more than one-half of the wage losses.

DOI

10.1257/aer.20180652

Publisher

American Economic Association

Subject Areas

LABOR MARKET ISSUES; Job security and unemployment dynamics; Dislocated workers