Layoffs, Income and Mobility

A new research study out of Princeton asserts that workers who are laid-off suffer a long ben_franklinterm reduction of income after finding another job.(1,2) Basically, after the immediate job loss, the next job will pay much less.

This particular study focused on working in Washington State who lost jobs in the 2008 downturn and its aftermath.  However, the authors note that the findings are similar to other studies of workers in Pennsylvania, Connecticut and elsewhere in the US.

The study looked at the earnings of workers who had worked for the same employer for at least six years and lost their job, compared to similar workers who had not been laid off.  They chose Washington State because the state Employment Security Department had the only database in the country that permits calculation of hourly compensation for all workers.

The authors use their data to make a case for better job training programs. Hard to argue with that.  Everyone in a community benefits from training that enables people to get jobs or better paying jobs. And these programs do just that.(3)

Brookings does raise an issue with what skills are being taught. There are skills that have only a limited “life expectancy” such as auto repair. Mechanics now either learn computerese or their skills become obsolete and they become unemployable. Automation will kill trucking jobs, but make new jobs in computer software.

The nuance that the authors recognize is that they don’t have data on workers who moved out-of-state after layoff. Is that how one minimizes income loss?

That raises a couple of interesting questions:

  1. As previously discussed, Americans are becoming less mobil. Does that have to change for wages to grow?
  2. If you income abruptly drops, you’re likely to be caught with a mortgage or rent you can’t afford. Why aren’t you moving?
  3. Why don’t states collect better data, using Washington state as a model?

Ignorance isn’t bliss. It just means you get to ignore a problem until it kills you.

 


Sources:

  1. Marta Lachowska, Alexandre Mas, Stephen A. Woodbury. Sources of Displaced Workers’ Long-Term Earnings Losses. NBER Working Paper No. 24217, 2018 DOI: 10.3386/w24217
  2. Princeton University, Woodrow Wilson School of Public and International Affairs. “Great Recession still plagues workers with lower lifetime wages.” ScienceDaily. ScienceDaily, 12 March 2018. <www.sciencedaily.com/releases/2018/03/180312133005.htm>
  3. https://www.nytimes.com/2016/07/06/business/economy/job-training-can-work-so-why-isnt-there-more-of-it.html
  4. https://www.brookings.edu/blog/brown-center-chalkboard/2017/06/28/apprenticeship-programs-in-a-changing-economic-world/

 

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