Working Paper: NBER ID: w31447
Authors: Evan K. Rose; Yotam Shemtov
Abstract: We study the long-run consequences of losing a low-wage job using linked employer-employee wage records and household surveys. For full-time workers earning $15 per hour or less, job loss due to an idiosyncratic, firm-wide contraction generates a 13% reduction in earnings six years later and over $40,000 cumulative lost earnings. Most of the long-run decrease stems from reductions in employment and hours as opposed to wage rates: job losers are twice as likely to report being unemployed and looking for work. By contrast, workers initially earning $15-$30 per hour see comparable long-run earnings losses driven primarily by reductions in hourly wages. Calibrating a dynamic job ladder model to the estimates implies that the rents from holding a full-time $15 per hour job relative to unemployment are worth about $20,000, more than seven times monthly earnings.
Keywords: low-wage job; job loss; earnings; employment outcomes
JEL Codes: J01; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| job loss due to an idiosyncratic firm-wide contraction (J63) | long-run earnings reduction (J31) |
| job loss due to an idiosyncratic firm-wide contraction (J63) | reductions in employment (J63) |
| reductions in employment (J63) | long-run earnings reduction (J31) |
| job loss due to an idiosyncratic firm-wide contraction (J63) | declines in hours worked (J22) |
| declines in hours worked (J22) | long-run earnings reduction (J31) |
| job loss due to an idiosyncratic firm-wide contraction (J63) | likelihood of being unemployed (J64) |
| job loss (J63) | probability of job separation (J63) |
| probability of job separation (J63) | declines in employment (J63) |
| job loss (J63) | likelihood of zero earnings for two or more years (C41) |