Association for Public Policy Analysis & Management

Panel: Worker Displacement

(Employment and Training Programs)

It is well-known that displaced workers suffer earnings losses that are large and long-lasting, but the reasons for these large losses are not well understood. This lack of understanding has impeded the development of effective policies to address and alleviate displaced workers' losses. The papers in this proposed session address important aspects of worker dislocation that have not been examined in previous research. Lachowska and Mas develop linked employer-employee panel data to examine the role of employers in generating displaced workers' earnings losses. They find that nearly half the wage-rate losses sustained by displaced workers are an employer effect — that is, they occur because displaced workers tend to lose jobs with high-wage employers and find post-displacement jobs mainly with low-wage employers. This finding poses challenges for the effectiveness of retraining and suggests that wage-subsidies may be a more effective approach to assisting displaced workers. Phelan's work examines the variability of displaced workers' losses — that is, the role of idiosyncratic risk or "bad luck" — which has been neglected in past work. He finds that examining average earnings losses of displaced workers understates the seriousness of the losses faced by displaced workers. Coate, Krolikowski, and Zabek examine a novel aspect of the earnings losses of young adults who are displaced — the proximity to their parents. They find that young displaced adults who live near their parents experience less severe earnings losses than others. Finally, the paper by Kosteas focusses on the importance of the labor market from which workers are displaced, in particular the "thickness" of the market for displaced workers' occupations. He finds that workers displaced from occupations that have a relatively large market in a region have better post-displacement outcomes than do workers displaced from relatively "thin" occupations. Kosteas's results have clear implications for the importance of worker mobility after displacement, and suggests a need for robust policies to assist displaced workers in moving to improved labor markets. All the papers in the proposed session are written with an eye to developing effective policy to mitigate the losses of displaced workers.