Earnings losses of displaced workers and the business cycle: An analysis with administrative data

Earnings losses of Connecticut workers affected by mass layoff are calculated using administrative data. Estimated reductions are initially more than 30 percent and six years later, as much as 15 percent. The Connecticut estimates are smaller than comparable ones from Pennsylvania administrative data but similar to those from the Panel Study of Income Dynamics (PSID) and Department of Workforce Services (DWS). Earnings reductions in Connecticut and Pennsylvania are concentrated among Unemployment Insurance recipients. An unusually high proportion of Unemployment Insurance beneficiaries in Pennsylvania explains the larger estimated losses relative to other studies. Fixed-effects, random growth, and matching estimators produced similar earnings loss estimates suggesting each is relatively unbiased in this context.

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Reconsidering the Consequences of Worker Displacements: Firm versus Worker Perspective

American Economic Journal Macroeconomics ◽

10.1257/mac.20170162 ◽

2019 ◽

Vol 11 (2) ◽

pp. 193-227 ◽

Cited By ~ 2

Author(s):

Aaron Flaaen ◽

Matthew D. Shapiro ◽

Isaac Sorkin

Keyword(s):

Survey Data ◽

Administrative Data ◽

Displaced Workers ◽

Economic Distress ◽

Earnings Dynamics ◽

Mass Layoffs ◽

Earnings Losses ◽

Prior Literature ◽

Survey Responses ◽

Mass Layoff

Prior literature has established that displaced workers suffer persistent earnings losses by following workers in administrative data after mass layoffs. This literature assumes that these are involuntary separations owing to economic distress. This paper examines this assumption by matching survey data on worker-supplied reasons for separations with administrative data. Workers exhibit substantially different earnings dynamics in mass layoffs depending on the reason for separation. Using a new methodology to account for the increased separation rates across all survey responses during a mass layoff, the paper finds earnings loss estimates that are surprisingly close to those using only administrative data. (JEL E32, J31, J63, J64, J65)

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Permanent Layoffs and Displaced Workers: Cyclical Sensitivity, Concentration, and Experience Following the Layoff

Journal of Income Distribution ◽

10.25071/1874-6322.718 ◽

1994 ◽

Author(s):

G. Picot ◽

W. Pyper

Keyword(s):

International Trade ◽

Labor Market ◽

Business Cycle ◽

Aggregate Demand ◽

Displaced Workers ◽

Competitive Process ◽

The Business Cycle

Concern about permanent layoffs and the experience of displaced workers is high because of the restructuring in firms currently taking place, and the effect of changes in international trade on some industries, often leading to layoffs. Our understanding of permanent layoffs has been hampered by the lack of appropriate data until recently. This paper uses two relatively new sources of data to examine (1) the variation in permanent layoffs over the business cycle, primarily to determine their significance during the expansionary periods when decreases in aggregate demand play little role in the layoff process, (2) where permanent layoff are concentrated in the economy during expansionary periods when restructuring and the competitive process play the major role in layoffs, and (3) the labor market experiences of displaced workers following the layoff.

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