American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Job Displacement and Earnings Losses: The Role of Joblessness
American Economic Journal: Macroeconomics
vol. 17,
no. 2, April 2025
(pp. 177–205)
Abstract
A large literature finds that workers displaced in mass layoffs experience persistent earnings losses. We find that the earnings penalty from job displacement is mediated by the length of the jobless spell after displacement. Workers who experience little or no joblessness suffer no losses on average; those who experience a prolonged period of joblessness experience large, persistent earnings losses. Job movers who experience joblessness tend to move to lower-paying firms, a phenomenon that informs our understanding of the mechanisms that generate earnings losses. We also find that jobless duration predicts earnings outcomes for separators generally, not only displaced workers.Citation
Fallick, Bruce, John Haltiwanger, Erika McEntarfer, and Matthew Staiger. 2025. "Job Displacement and Earnings Losses: The Role of Joblessness." American Economic Journal: Macroeconomics 17 (2): 177–205. DOI: 10.1257/mac.20210329Additional Materials
JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- J62 Job, Occupational, and Intergenerational Mobility; Promotion
- J63 Labor Turnover; Vacancies; Layoffs
- J64 Unemployment: Models, Duration, Incidence, and Job Search