Job loss by wage level: lessons from the Great Recession in Ireland

Abstract

This paper explores the incidence of job loss by wage level during the Great Recession, using data for Ireland. Ireland experienced a particularly pronounced decline in employment by international and historical standards, which makes it a valuable case study. Using EU Survey on Income and Living Conditions (EU-SILC) data, our analysis reveals that the probability that an employee remains in employment, from one year to the next, is positively related to their monthly earnings during both boom and bust. The gradient with wages, however, is much more marked during the bust and remains significantly so even after controlling for a range of individual characteristics including gender, age, education, labour market history, part-time status, industries or occupations.JEL codes: E24, J23, J24, J62, J63

The Changing Nature of Irish Wage Inequality from Boom to Bust

“…10 CSO data show employment in the relatively low skilled construction sector fell from 225,100 in 2005 to 103,300 in 2012. These unemployment data are consistent with recent work by Nolan and Voitchovsky (2016) who used the EU-SILC data to examine job loss by wage level during the Great Recession. They found that the probability that an employee remains in employment from one year to the next is positively related to their monthly earnings during both the boom and the recession.…”

“…Callan et al (2014) examined income inequality from 2008-2013 and found that the largest falls in market income occurred in the bottom half of the income distribution. Much of this reflects the loss of earnings resulting from job losses which were most pronounced among the lower paid (Nolan and Voitchovsky, 2016). Callan et al (2014) focused their analysis on the distribution of total household income and on the impact of changes in the tax benefit system on this distribution.…”

“…It is well known that compositional changes can have a significant impact on the wage structure (Solon et al, 1994). Since low paid workers lost their jobs in relatively large numbers during the Great Recession (Nolan and Voitchovsky, 2016), the ensuing truncation of the wage distribution is likely to boost reported average wages of the remaining workers, mitigating any potential pro-cyclical pattern in average wages. The loss of these low paid workers from the sample of workers is also likely to affect the dispersion of wages among the remaining workers.…”

Occupational mobility, employment transitions and job quality in Europe: The impact of the Great Recession

“…The same paper by Nolan and Voitchovsky (2016) showed that in Ireland the positive correlation between workers’ monthly earnings and the probability of remaining in employment was higher during the ‘bust’ period (2009) compared with the boom year (2006). Bachmann et al (2015) investigated the heterogeneous effects of the Great Recession (2008–2010) on labour market transitions in Europe by sociodemographic group and employment type.…”

“…In relation to the first aspect, Nolan and Voitchovsky (2016) investigated the incidence of job loss by job quality levels (wage quintiles) in Ireland. The analysis, which was based on EU Survey on Income and Living Conditions (EU-SILC) cross-sectional data for employees in 2006 and 2009, showed that the probability of remaining in employment is positively correlated with monthly earnings, after controlling for a series of individual and household variables which may affect labour market circumstances.…”