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  5. Sources of Displaced Workers' Long-Term Earnings Losses

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Sources of Displaced Workers' Long-Term Earnings Losses

  • Marta Lachowska
  • Alexandre Mas
  • Stephen A. Woodbury
American Economic Review
vol. 110, no. 10, October 2020
(pp. 3231–66)
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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.

Citation

Lachowska, Marta, Alexandre Mas, and Stephen A. Woodbury. 2020. "Sources of Displaced Workers' Long-Term Earnings Losses." American Economic Review 110 (10): 3231–66. DOI: 10.1257/aer.20180652

Additional Materials

JEL Classification

  • E32 Business Fluctuations; Cycles
  • J22 Time Allocation and Labor Supply
  • J31 Wage Level and Structure; Wage Differentials
  • J63 Labor Turnover; Vacancies; Layoffs
  • R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics