Searching for Job Security and the Consequences of Job Loss

Abstract

Rasool Zandvakil, and seminar participants at various conferences and universities for their thoughts and comments. Dorisz Albrecht and Hugo Lhullier provided outstanding research assistance. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Job Displacement and Job Mobility: The Role of Joblessness

“…See the Appendix for details. Jarosch (2015), Krolikowski (2017), and Jung and Kuhn (2019) develop models in which job ladders play an important role in generating persistent earnings losses following job losses and which offer a partial, but incomplete, explanation of our results. In these models, firms that occupy higher rungs of the job ladder offer jobs that pay more and are more stable (i.e., the jobs have a lower probability of exogenously ending with an involuntary separation).…”

“…An involuntary separation is costly because the subsequent job is likely to be lower on the ladder (since it takes time to find a high-quality job), yielding lower pay immediately, and also persistently by increasing the frequency of subsequent separations. In Jarosch (2015) and Jung and Kuhn (2019), the periods of nonemployment also reduce human capital relative to that of employed workers, which further persistently reduces relative earnings. Thus, these models are consistent with our findings in the sense that they predict that earnings losses will be associated with movements down the job ladder for those experiencing a separation into nonemployment.…”

“…Since displaced workers are only a small share of total job changers, this suggests a need for a more general framework for how job transitions through nonemployment lead to earnings losses. The theoretical models developed by Jarosch (2015), Krolikowski (2017), and Jung and Kuhn (2019) do interpret the earnings losses of displaced workers using models of the labor market that produce job ladders. However, these models cannot explain why the duration of nonemployment is so strongly related to earnings losses and movements down the job ladder.…”

Did Timing Matter? Life Cycle Differences in Effects of Exposure to the Great Recession

“…3 Nearly 7.8 million people were laid off in the first quarter of 2009 alone, about 40 percent more than in the average quarter in 2006. 4 Job loss can have persistent and even permanent negative consequences (Topel, 1990;Ruhm, 1991;Jacobson et al, 1993;Neal, 1995;Sullivan and Von Wachter, 2009;Davis and Von Wachter, 2011;Hershbein, 2012;Jarosch, 2015;Yagan, 2018;Stuart, 2019). Analysis of the consequences of job loss often focuses on prime-age workers with relatively strong labor force attachment and occasionally restricts attention to men, but given changes in the prevalence of work, education, and other activities over the life cycle, the nature of the harm from recession exposure may depend on when in a person's life they are exposed to it.…”

Human Capital Depreciation

“…Blundell, Dias, Meghir and Shaw (2016) estimate human capital depreciation rates of 6-8%. Macroeconomic models incorporating human capital depreciation tend to use very different parameterizations, including Ljungqvist and Sargent (1998) (20% chance of losing skills), Kehoe, Midrigan and Pastorino (2019) (1.4% during a non-employment spell), Jarosch (2015) (15% depreciation rate) and Manuelli and Seshadri (2014) (21% depreciation rate). We offer a depreciation rate estimate that leverages quasi-random variation in time not working.…”