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Earnings Losses after Non-Employment Increase with Age

  • Thomas Zwick

This paper shows that after older workers experience periods of non-employment, earnings losses increase. Before non-employment, older employees have relatively higher earnings compared to younger employees without employment interruptions. This earnings advantage turns into a strong earnings disadvantage shortly before, and for a long time after, unemployment. Younger people who lose their jobs have a relatively stable, small earnings disadvantage before non-employment and quickly earn more than those without employment interruptions. The earnings effect of returning to the same employer after non-employment suggests that more involuntary work interruptions for older employees better explains the results than the loss of an implicit contract or specific human capital.

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Article provided by LMU Munich School of Management in its journal Schmalenbach Business Review.

Volume (Year): 64 (2012)
Issue (Month): 1 (January)
Pages: 2-19

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Handle: RePEc:sbr:abstra:v:64:y:2012:i:1:p:2-19
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  1. Richard Disney, 1996. "Can We Afford to Grow Older?," MIT Press Books, The MIT Press, edition 1, volume 1, number 026204157x, June.
  2. Margolis, D.N., 2000. "Worker Displacement in France," Papiers d'Economie Mathématique et Applications 2000.03, Université Panthéon-Sorbonne (Paris 1).
  3. Louis S. Jacobson & Robert J. LaLonde & Daniel Sullivan, 1992. "Earnings Losses of Displaced Workers," Upjohn Working Papers and Journal Articles 92-11, W.E. Upjohn Institute for Employment Research.
  4. Chan, Sewin & Stevens, Ann Huff, 2001. "Job Loss and Employment Patterns of Older Workers," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 484-521, April.
  5. Stefan Bender & Christian Dustmann & David Margolis & Costas Meghir, 1999. "Worker displacement in France and Germany," IFS Working Papers W99/14, Institute for Fiscal Studies.
  6. Carneiro, Anabela & Portugal, Pedro, 2006. "Earnings Losses of Displaced Workers: Evidence from a Matched Employer-Employee Data Set," IZA Discussion Papers 2289, Institute for the Study of Labor (IZA).
  7. Burda, Michael C. & Mertens, Antje, 1999. "Estimating wage losses of displaced workers in Germany," SFB 373 Discussion Papers 1999,35, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  8. Guido Schwerdt, 2008. "Labor Turnover before Plant Closure: ‘Leaving the Sinking Ship’ vs. ‘Captain Throwing Ballast Overboard’," CESifo Working Paper Series 2252, CESifo Group Munich.
  9. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
  10. Gartner, Hermann, 2005. "The imputation of wages above the contribution limit with the German IAB employment sample," FDZ Methodenreport 200502_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  11. Zwick, Thomas, 2008. "The Employment Consequences of Seniority Wages," ZEW Discussion Papers 08-039, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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