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The Effects of Being Out of the Labor Market on Subsequent Wages: Evidence for Uruguay

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  • Verónica Amarante

    ()

  • Rodrigo Arim

    ()

  • Andrés Dean

    ()

Abstract

Based on administrative data combining workers’ earnings histories and unemployment insurance benefits, we document short and long term wage losses for a large sample of Uruguayan formal workers with high tenure. The contribution of this paper is to provide original evidence about job separation costs in a developing country, based on a unique array of social security and unemployment insurance administrative micro-data. Our main findings indicate that workers lose around 38 % of their previous wages in the first quarter after separation, and 1 year after, losses are still more than 14 %. If we consider earnings plus unemployment insurance benefits, losses at the quarter of separation are considerable lower, amounting 22 % of previous wages. We also provide original evidence about how wage losses vary across age groups, gender, industry and size of the firm. Differences between switchers and non switchers, as well as the effects of the economic cycle are also analyzed. Copyright Springer Science+Business Media New York 2014

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File URL: http://hdl.handle.net/10.1007/s12122-013-9171-3
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Article provided by Springer in its journal Journal of Labor Research.

Volume (Year): 35 (2014)
Issue (Month): 1 (March)
Pages: 39-62

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Handle: RePEc:spr:jlabre:v:35:y:2014:i:1:p:39-62
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/economics/journal/12122

Keywords: Wage losses; Job separation; J31; J63; 65;

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Find related papers by JEL classification:
  • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
  • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
  • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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  1. David S. Kaplan & Raymond Robertson & Gabriel Martínez González, 2005. "What Happens to Wages after Displacement?," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Spring 20), pages 197-242, January.
  2. 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).
  3. Marcus Eliason, 2011. "Income after job loss: the role of the family and the welfare state," Applied Economics, Taylor & Francis Journals, vol. 43(5), pages 603-618.
  4. Couch, Kenneth A. & Jolly, Nicholas A. & Placzek, Dana W., 2011. "Earnings losses of displaced workers and the business cycle: An analysis with administrative data," Economics Letters, Elsevier, vol. 111(1), pages 16-19, April.
  5. Eliason, Marcus & Storrie, Donald, 2004. "Does job loss shorten life?," Working Papers in Economics 153, University of Gothenburg, Department of Economics, revised 17 Sep 2007.
  6. Lori G. Kletzer, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 115-136, Winter.
  7. Kletzer, Lori Gladstein, 1989. "Returns to Seniority after Permanent Job Loss," American Economic Review, American Economic Association, vol. 79(3), pages 536-43, June.
  8. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March.
  9. Alexander Hijzen & Richard Upward & Peter W. Wright, 2010. "The Income Losses of Displaced Workers," Journal of Human Resources, University of Wisconsin Press, vol. 45(1).
  10. Jukka Appelqvist, 2007. "Wage and Earnings Losses of Displaced Workers in Finland," Discussion Papers 422, Government Institute for Economic Research Finland (VATT).
  11. Addison, John T & Portugal, Pedro, 1989. "Job Displacement, Relative Wage Changes, and Duration of Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 281-302, July.
  12. Bucheli, Marisa & Furtado, Magdalena, 2001. "Impacto del desempleo sobre el salario: una estimación de la pérdida salarial para Uruguay," Oficina de la CEPAL en Montevideo (Estudios e Investigaciones) 28660, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
  13. Steven J. Davis & Till Von Wachter, 2011. "Recessions and the Costs of Job Loss," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 1-72.
  14. Ben Lockwood, 1991. "Information Externalities in the Labour Market and the Duration of Unemployment," Review of Economic Studies, Oxford University Press, vol. 58(4), pages 733-753.
  15. Kenneth A. Couch & Dana W. Placzek, 2010. "Earnings Losses of Displaced Workers Revisited," American Economic Review, American Economic Association, vol. 100(1), pages 572-89, March.
  16. Bruce C. Fallick, 1996. "A Review of the Recent Empirical Literature on Displaced Workers," ILR Review, Cornell University, ILR School, vol. 50(1), pages 5-16, October.
  17. Daniel Sullivan & Till von Wachter, 2009. "Job Displacement and Mortality: An Analysis Using Administrative Data," The Quarterly Journal of Economics, Oxford University Press, vol. 124(3), pages 1265-1306.
  18. Marcus Eliason, 2012. "Lost jobs, broken marriages," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(4), pages 1365-1397, October.
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Cited by:

  1. Kaldewei, Cornelia & Weller, Jürgen, 2013. "Empleo, crecimiento sostenible e igualdad," Macroeconomía del Desarrollo 145, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
  2. Verónica Alaimo & Mariano Bosch & David S. Kaplan & Carmen Pagés & Laura Ripani, 2015. "Jobs for Growth," IDB Publications (Books), Inter-American Development Bank, number 90977, September.
  3. Andrés Dean & Estefanía Galván & Ivone Perazzo, 2014. "¿Acceden al subsidio por desempleo los asalariados rurales en Uruguay? Análisis de la situación actual y simulación de esquemas alternativos," Documentos de Trabajo (working papers) 14-22, Instituto de Economía - IECON.
  4. -, 2014. "Inestabilidad y desigualdad: La vulnerabilidad del crecimiento en América Latina y el Caribe," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 128 edited by Cepal.
  5. Verónica Amarante & Andrés Dean, 2012. "Dinámica del mercado laboral uruguayo," Documentos de Trabajo (working papers) 12-17, Instituto de Economía - IECON.

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