Three essays on the consequences of job displacement

Date of Completion

January 2008


Economics, Labor




This dissertation consists of three chapters that examine the consequences of job displacement. Chapter 1 provides estimates of earnings losses of older workers who experience mass layoffs relative to a continuously employed comparison group. The analysis uses data from the unemployment insurance system in Connecticut. These data contain payroll information for virtually all workers in the state and, relative to survey-based data, contain more instances of workers displaced by mass layoff. The data provide the basis for disaggregated estimates by age, gender, and industry of employment. The estimates show earnings losses rise with age and are larger for those subsequently re-employed in different industry sectors. These findings are consistent with the idea that earnings decline in situations of displacement due to losses of firm-specific human capital. ^ Chapter 2 shows the state of the economy influences the depth of initial earnings losses and the recovery pattern of displaced workers' earnings. This research uses administrative records from Connecticut. Estimates indicate the year after separation, workers displaced during a recession experience earnings losses that are seven percentage points larger than those of their counterparts who lose their job during an expansion. Five years after job loss, the gap in earnings losses grows to 13 percentage points. This chapter calculates re-employment probabilities and investigates the relationship between earnings losses and multiple job separation and unemployment insurance receipt as potential reasons for the larger observed earnings losses. After investigating these explanations, findings show the decrease in employment demand that occurs during a recession appears to drive the results. ^ Chapter 3 uses the 1968 through 1993 waves of the Panel Study of Income Dynamics to examine how job displacement influences intragenerational income mobility. Using individual labor earnings, this study shows displacement increases the probability of downward mobility for several years after separation occurs. Furthermore, the probability of being in the bottom half of the labor earnings distribution increases significantly not only in the year of job loss, but also for several years afterwards. Income from other family members and government transfer payments mitigates displacement's adverse effect by reducing the short-term impact and eliminating the long-term affect. ^