The unequal job security scars of displacement

Segmented labor markets, where stable jobs coexist with insecure, high-turnover positions, make job security key to workers’ long-term outcomes. Using Dutch administrative data, we study the impact of displacement on job security and the role of cash-on-hand. One year after displacement, permanent employment falls by about one-fifth and remains lower five years later, amplifying wage losses: displaced workers who lose job security experience losses 21 % larger than those retaining a permanent contract. Exploiting a policy granting lump-sum transfers only to some displaced workers, we find that eligibility attenuates job security losses and, as a result, wage losses. Effects are larger among liquidity-constrained workers, consistent with binding liquidity constraints. Our findings highlight job security as a key channel through which cash-on-hand reduces the long-run costs of job loss, with implications for the design of unemployment insurance.