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Adjusters and Casualties: The Anatomy of Labor Market Displacement

Author

Listed:
  • Eric A. Hanushek
  • Simon Janssen
  • Jacob D. Light
  • Lisa Simon

Abstract

We analyze the full distribution of displaced workers’ earnings losses using a new method that combines matching and synthetic control group approaches at the individual level. We find that the distribution of earnings losses is highly skewed. Average losses, as estimated by conventional event studies, are driven by a small number of workers who suffer catastrophic losses, while most recover quickly. Observable worker characteristics explain only a small fraction of the variance in earnings losses. Instead, we find substantial heterogeneity in earnings losses even among workers displaced by the same firm who have identical observed characteristics such as education, age, and gender. Workers with minimal earnings losses adjust quickly by switching industries, occupations, and especially regions, while comparable workers with catastrophic losses adjust slowly, even though they are forced to make comparable numbers of switches in the long run.

Suggested Citation

  • Eric A. Hanushek & Simon Janssen & Jacob D. Light & Lisa Simon, 2025. "Adjusters and Casualties: The Anatomy of Labor Market Displacement," CESifo Working Paper Series 11865, CESifo.
    • Handle: RePEc:ces:ceswps:_11865
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    Keywords

    displacement losses; synthetic control groups; distributions of treatment effects.;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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