2007 Reports

Long-Term Earnings Losses Due to Job Separation During the 1982 Recession

Wachter, Till von; Song, Jae; Manchester, Joyce

We present new estimates of the long-run earnings consequences of job separations that occurred during the 1982 recession based on a representative sample of workers drawn from Social Security administrative earnings data ranging from 1974 to 2005. Workers permanently leaving their long-term employer in the period from 1980 to 1985 experienced large and persistent earnings reductions lasting 15 to 20 years compared to workers of similar age and earnings potential who did not leave their employer. Earnings losses last up to 15 years even for workers displaced in better economic times or after shorter job tenure. These losses arise both due to reductions in employment as well as to reductions in annual earnings for those working. These preliminary estimates appear to confirm results from single U.S. states or limited time periods suggesting that job loss can be very costly for affected workers.