Industrial Dislocation and the Private Cost of Labor Adjustment

Glenday, Graham; Jenkins, Glenn F.

doi:10.1111/j.1465-7287.1984.tb00765.x

Cited by 5 publications

(1 citation statement)

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“…This literature has evaluated the losses incurred by displaced workers using two approaches (often together.) The first considers the value of the time the displaced worker spends unemployed (Bale, 1976;Neumann, 1978); the second compares workers' wages or earnings on the Job that was lost to those on the Job eventually obtained (Jacobson, 1978;Jenkins-I'lontmarquette, 1979;Kiefer-Neumann, 1979; Sandell-Shapiro, 1983;Glenday-Jenkins, 1984). Only if: 1) Workers realize that the characteristics that produced rents on the previous Job have no effect on the wage-offer distribution they must search over; 2) There is no unemployment insurance; and 3) Earnings obtained on the previous Job are adjusted appropriately, can one obtain a correct estimate of the cost to society.…”

Section: The Nature Of the Lossesmentioning

confidence: 99%

The Costs of Worker Displacement

Hamermesh

1987

The Quarterly Journal of Economics

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This study defines the nature of worker displacement and develops a mechanism for inferring the amount of losses caused by displacement in a way that is tied to economic theory. Data from the Panel Study of Income Dynamics are first used to identify the characteristics of displaced workers. After a demonstration that usual methods of evaluating workers' losses cannot provide correct measures of the cost to society, a game-theoretic model determining the amount of firm-specific investment in workers is developed. As workers' and firms' horizons decrease, such investment will be reduced; this will be exhibited in a flattening of the wage-tenure profile as the date of displacement approaches. Examination of the profile thus provides a test whether firms and workers have good information about impending displacement. Using the P5W data for workers displaced between 197? and 1981, the study shows there is no significant flattening of the wage-tenure profile in the entire sample. (However, some flattening does occur among unionized workers, and also among workers who are laid-off permanently from a plant that remains open.) This suggests that workers are surprised by displacement, for they continue investing in firm-specific human capital up to the time of displacement. The present value of the worker's share of the lost returns on this investment is around $7000 (1980 dollars) under intermediate assumptions about the real rate of discount, depreciation on such investment and the effect of tenure on the rate of voluntary separation.

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Section: The Nature Of the Lossesmentioning

confidence: 99%