The Costs of Worker Dislocation

The real loss in earnings incurred by dislocated workers may be much greater than previously thought, say the authors. Jacobson, LaLonde and Sullivan develop their own statistical method for interpreting a unique and substantial administrative data set from Pennsylvania covering the years 1979 to 1985. Based on this long-term data the authors conclude:

• The majority of earnings losses incurred by dislocated workers occur after reemployment Preseparation losses occur and are likely to begin accumulating up to three years in advance of dislocation
• Workers dislocated from distressed firms suffer greater losses
• Previous studies, limited by sample size and/or a short time frame, likely underestimate the actual losses of dislocated workers.
• The data set used also allows the authors to examine worker dislocation in relation to industry, demographics, foreign trade, market conditions, and the economic health of firms.

The authors use these findings, in conjunction with their comprehensive interpretation of existing worker dislocation literature, to develop policy recommendations concerning prevailing and potential assistance programs. They conclude by proposing that any new policies designed to compensate dislocated workers should target those suffering the greatest losses while providing incentives to take new jobs - even if lower paying - as soon as possible. Programs which allow dislocated workers to receive compensation after regaining employment (modified earnings subsidies) are promoted as practical and financially feasible.

"This monograph is the latest in the long literature measuring those losses (incurred by dislocated workers). It is also unequivocally the best." Daniel S. Hamermesh, ILR Review

"This is a carefully written monograph by respected economists with significant experience in evaluating programs to assist the unemployed. Their comprehensive discussions of alternative measures of the costs of dislocation and how to overcome many of the econometric problems of measurement will be of great interest. This accessible book will become a necessary part of the tool kit for those who want to think seriously about worker dislocation." Choice

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