Earnings Losses of Older Displaced Workers

Abstract

This article provides detailed estimates of earnings losses of older workers (aged 40 years and older) who experience mass layoffs relative to a continuously employed comparison group. The analysis made use of information from the unemployment insurance system for the state of Connecticut. These administrative records contain payroll information for virtually all workers in the state and, relative to previous research on the basis of survey data, contain many more instances of workers displaced because of mass layoffs. These data provided the basis for detailed, disaggregated estimates by age, gender, and industry of employment. The estimates indicated that earnings losses associated with displacement rose sharply with age and were larger for those subsequently reemployed in different industry sectors. These findings are consistent with the idea that earnings decline following displacement due to losses of firm-specific human capital. Earnings reductions were larger for men than women but were proportionately very similar.