Long-Term Impacts of Short-Term Income Replacement Ratios After Job Loss

Barnette, Justin (2021): Long-Term Impacts of Short-Term Income Replacement Ratios After Job Loss.

Abstract

How does the first job after involuntary displacement affect later income growth? Displaced workers replace 133% of their pre-displacement hourly income within two years of involuntary displacement on average but this is not enough to catch up to those of the same age and similar education. Changes in these ratios have small impacts on the long-term. These results persist through robustness checks and align with a labor income process calibrated to the PSID. However, 35% of all displaced workers recover as defined in this paper. Being male or being white each increases the probability of recovering by about 20%.

• Item Type: MPRA Paper
• Language: English
• Keywords: Displaced Workers, Unemployment, Wages
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J63 - Turnover ; Vacancies ; Layoffs

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