Sources of Displaced Workers’ Long-Term Earnings Losses

2020/09/28 by Marta Lachowska, Alexandre Mas, Stephen A. Woodbury · 190 citations
Economics, Econometrics and Finance · Health Professions · Social Sciences · #Demographic economics #Displaced workers #Displacement (psychology) #Earnings #Economics #Employment and Welfare Studies #Finance #Great recession #Hourly wage #Job loss #Labor market dynamics and wage inequality #Labour economics #Recession #Retirement, Disability, and Employment #Term (time) #Unemployment #Wage #Work (physics) #Work hours #Working hours

paper · doi:10.1257/aer.20180652

published in American Economic Review 110(10), 3231-3266 (American Economic Association)

openalex publication_date 2020/09/28 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01

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. (JEL E32, J22, J31, J63, R23)

Citations

• Earnings Losses of Displaced Workers Revisited
• Wage Differentials, Employer Size, and Unemployment

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Related

• The Sources of the Wage Losses of Displaced Workers
• The Firm’s Role in Displaced Workers’ Earnings Losses
• Job Displacement and Earnings Losses: The Role of Joblessness
• Earnings Losses of Displaced Workers Revisited
• The Costs of Job Displacement over the Business Cycle and Its Sources: Evidence from Germany