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Effects of employer-provided severance benefits on reemployment outcomes

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  • Yolanda Kodrzycki

Abstract

Surveys have shown that many employers offer severance packages to their laid-off workers and that severance pay provides substantial income for many people displaced from long-time jobs. Yet little, if anything , is known about the effects of severance pay. Does it lead people to alter the intensity of their job search or their decisions to take advantage of retraining opportunities? Does it enable them to hold out for better-paying jobs? ; The author forges new ground with this study by combining information from an administrative data base on displaced workers from Massachusetts that includes the names of their previous employers with severance plan summaries obtained from a subset of these employers. She finds that severance recipients in Massachusetts returned to work more slowly than nonrecipients in the early 1990's, even after adjusting for other factors such as local unemployment rates and demographic characteristics that may have played an independent role. Severance benefits had some positive impact on enrollments in remedial and basic education programs but no consequences for reemployment pay.

Suggested Citation

  • Yolanda Kodrzycki, 1998. "Effects of employer-provided severance benefits on reemployment outcomes," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 41-68.
    • Handle: RePEc:fip:fedbne:y:1998:i:nov:p:41-68
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    References listed on IDEAS

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    Cited by:

    1. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R., 2017. "Inside severance pay," Journal of Public Economics, Elsevier, vol. 145(C), pages 211-225.
    2. Christian Grund, 2006. "Severance payments for dismissed employees in Germany," European Journal of Law and Economics, Springer, vol. 22(1), pages 49-71, July.
    3. Yolanda Kodrzycki, 2007. "Using unexpected recalls to examine the long-term earnings effects of job displacement," Working Papers 07-2, Federal Reserve Bank of Boston.
    4. Ying L. Compton & Angela K. Gore & Susan L. Kulp, 2017. "Compensation design and political risk: the case of city managers," Review of Accounting Studies, Springer, vol. 22(1), pages 109-140, March.
    5. Stéphane Auray & Samuel Danthine & Markus Poschke, 2020. "Understanding the Determination of Severance Pay: Mandates, Bargaining, and Unions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(3), pages 1073-1111, July.
    6. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R., 2014. "Severance Pay," CEPR Discussion Papers 10182, C.E.P.R. Discussion Papers.
    7. Raj Chetty, 2008. "Moral Hazard versus Liquidity and Optimal Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 173-234, April.
    8. Samuel Danthine & Markus Poschke & Stephane Auray, 2016. "Understanding Severance Pay Determination: Mandates, Bargaining, and Unions," 2016 Meeting Papers 967, Society for Economic Dynamics.
    9. Parsons, Donald O., 2017. "Voluntary Employer-Provided Severance Pay," IZA Discussion Papers 11067, Institute of Labor Economics (IZA).
    10. Andersson, Josefine, 2018. "Lump-sum severance grants and the duration of unemployment," Working Paper Series 2018:23, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    11. Auray, Stéphane & Danthine, Samuel & Poschke, Markus, 2014. "Mandated versus Negotiated Severance Pay," IZA Discussion Papers 8422, Institute of Labor Economics (IZA).
    12. Eunice S. Han, 2023. "What did unions do for union workers during the COVID‐19 pandemic?," British Journal of Industrial Relations, London School of Economics, vol. 61(3), pages 623-652, September.
    13. repec:hal:spmain:info:hdl:2441/7hh2up94ii8d2rg9pa9vg9eh3t is not listed on IDEAS
    14. Raj Chetty, 2008. "Moral Hazard vs. Liquidity and Optimal Unemployment Insurance," NBER Working Papers 13967, National Bureau of Economic Research, Inc.
    15. repec:hal:spmain:info:hdl:2441/65dh65gjnn96rqgo52mg09a1uu is not listed on IDEAS

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