The Unequal Consequences of Job Loss across Countries

Abstract

We document the consequences of losing a job across countries using a harmonized research design applied to seven matched employer-employee datasets. Workers in Denmark and Sweden experience the lowest earnings declines following job displacement, while workers in Italy, Spain, and Portugal experience losses three times as high. French and Austrian workers face earnings losses somewhere in between. Key to these differences is that southern European workers are less likely to find employment following displacement. Loss of employer-specific wage premiums explains a substantial portion of wage losses in all countries. (JEL J31, J63, J64)

Earnings, labor market dynamics, and inequality in Sweden

“…Previous literature has found large lasting negative effects of displacement on earnings (e.g., Jacobson et al, 1993;Davis and Von Wachter, 2011). Using a mass-layoff instrument, Bertheau et al (2023) found that displaced Swedish workers have a 5 percentage point higher probability of being unemployed and 10 percentage points lower earnings than non-displaced workers five years after losing their employment. From a similar analysis using our simulated data, we find that, depending on the scale of the shock, displaced men have earnings losses of 9.4-11.1 percent and have 21.1-21.7 percent higher non-employment rates than their non-displaced counterparts.…”

Coworker networks and the labor market outcomes of displaced workers: Evidence from Portugal

“…ing workers displaced by the same firm, connected workers end up in a firm that pays, on average, higher wages. 25 Taking the ratio of this effect (0.0177) to the effect of the coworker link on entry-level wages without accounting for hiring firm characteristics (0.0417), one can learn how much of the wage effect comes from workers moving to firms with higher wage premia (e.g., Bertheau et al, 2023;Lachowska et al, 2020). The result of this exercise suggests that 40% of wage gain that connected workers obtain comes from moving to better-paying firms, while the remaining is likely to be associated with the better screening by firms when hiring connected candidates.…”

“…Moreover, given the larger relative effect, our findings suggest that coworker networks might be key to reducing the cost of job loss in those countries where such losses are larger. This is especially true because they not only reduce the incidence of (long-term) unemployment but also because they help avoid a critical source of post-displacement income losses: moving to worse firms and poorer workfirm matches (Bertheau et al, 2023;Raposo et al, 2021). Thus, from a policy perspective, one promising way to address the incidence of unemployment and alleviate the cost of job displacement is to encourage well-connected workers to rely on their networks in the job search process, while devoting the bulk of employment office resources to helping the not-so-well-connected.…”

“…Similar to recent work on the link between job displacement and coworker networks (e.g., Cingano & Rosolia, 2012;Glitz, 2017;Saygin et al, 2021), we shed light on how former coworkers can help displaced workers to recover from the negative employment shock. However, our analysis differs from the existing literature by focusing on a country where only a quarter of displaced workers find a job within 1 year (OECD, 2013a) and workers experience the largest losses after displacement driven by the fact that they are re-employed in worse firms and that the new worker-firm matches tend to be of poorer quality (Bertheau et al, 2023;Raposo et al, 2021). In this regard, our focus on Portugal helps inform policymakers about the potential to promote the use of personal connections among displaced workers to mitigate the large costs of displacement in sluggish labor markets.…”

When it Hurts the Most: Timing of Parental Job Loss and a Child's Education

“…Plant closure causes moderate but persistent shocks to parental labor market outcomes and family income. Exploiting the panel of job spells, we estimate event studies around plant closure akin to the standard approach in the broad literature on job loss e ects (e.g., Bertheau et al, 2022). In the years following plant closure, displaced parents exhibit an eight percentage point (p.p.)…”