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Sources of Displaced Workers' Long-Term Earnings Losses

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  • Marta Lachowska
  • Alexandre Mas
  • Stephen A. Woodbury

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.

Suggested Citation

  • Marta Lachowska & Alexandre Mas & Stephen A. Woodbury, 2020. "Sources of Displaced Workers' Long-Term Earnings Losses," American Economic Review, American Economic Association, vol. 110(10), pages 3231-3266, October.
    • Handle: RePEc:aea:aecrev:v:110:y:2020:i:10:p:3231-66
    DOI: 10.1257/aer.20180652
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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