The Costs of Job Displacement over the Business Cycle and Its Sources: Evidence from Germany

2023/04/27 by Johannes F. Schmieder, Till von Wachter, Jörg Heining · 4 citations
Health Professions · Economics, Econometrics and Finance · Social Sciences · #Employment and Welfare Studies #Labor market dynamics and wage inequality #Retirement, Disability, and Employment

paper · doi:10.1257/aer.20200252

Abstract

We document the sources behind the costs of job loss over the business cycle using administrative data from Germany. Losses in annual earnings after displacement are large, persistent, and highly cyclical, nearly doubling in size during downturns. A large part of the long-term earnings losses and their cyclicality is driven by declines in wages. Key to these long-lasting wage declines and their cyclicality are changes in employer characteristics, as displaced workers switch to lower-paying firms. These losses increase with duration of nonemployment. Changes in characteristics of displaced workers or displacing firms, and other post-job loss career outcomes explain little of the cyclicality. (JEL E24, E32, J31, J63, J64, J65)

Citations

• Earnings Losses of Displaced Workers Revisited
• Sources of Displaced Workers’ Long-Term Earnings Losses

Cited by

• The Firm’s Role in Displaced Workers’ Earnings Losses
• Black–White inequality in earnings losses after job displacement, 1981–2020
• Automation and Rent Dissipation: Implications for Wages, Inequality, and Productivity
• Job Displacement and Earnings Losses: The Role of Joblessness

Related

• Earnings Losses and Unemployment of Displaced Workers in Germany
• Job Displacement and Earnings Losses: The Role of Joblessness
• The Heterogeneous Earnings Impact of Job Loss Across Workers, Establishments, and Markets
• The Sources of the Wage Losses of Displaced Workers
• Sources of Displaced Workers’ Long-Term Earnings Losses