Don’t look down: new evidence on job loss in a flexible labour market

Publication type

Research Paper

Series Number

15/10

Series

GEP Discussion Papers

Authors

Publication date

June 1, 2015

Summary:

We estimate the earnings, hours and income effects of job
loss (displacement) for a representative sample of UK workers from 1991–2007.  We are able to follow workers
before and after displacement regardless of their labour market state, and we
are able to precisely match displaced workers with observably similar
non-displaced workers. We show that job loss is associated with a long-run
reduction in income which is mainly due to reductions in monthly pay
conditional on employment rather than in employment propensity. Entry into
unemployment is very short-lived, and while there is some entry into other
labour market states, this does little to compensate for income losses.  Total income from welfare payments, including
unemployment insurance, retirement income and invalidity benefit reduces losses
by only 15% in the first 12 months after job loss, and become even less important as time passes.  The lack of a
“safety net” means that job loss in the UK has a similar effect to job loss in
the US.

Subjects

Link

https://www.nottingham.ac.uk/gep/news-events/news/papers/1510.aspx

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