Dr. Alexandre Mas, Princeton University

Dr. Mas will present “Sources of the Displaced Workers’ Long -Term Earnings Losses”

Abstract

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 lost employer-specific rents. The analysis is based on employer-employee linked panel data from Washington State assembled from 2002–2014 administrative wage and unemployment insurance records.

Three main findings emerge from the empirical work. First, five years after job loss, the earnings of these displaced workers were 17 percent less than those of comparison groups of nondisplaced 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 one-half to reduced hourly wages and one half to reduced work hours. Third, time-invariant characteristics of the employers who rehire displaced workers appear to account for about one-fifth of the long-term earnings losses and nearly of the lower long-term hourly wages of these workers.