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The Long-Term Impact of Job Displacement in Germany During the 1982 Recession on Earnings, Income, and Employment

  • Johannes F. Schmieder

    ()

    (Columbia University - Department of Economics)

  • Till von Wachter

    ()

    (Columbia University - Department of Economics)

  • Stefan Bender

    ()

    (Institute for Employment Research (IAB))

We show that workers displaced from their stable jobs during mass-layoffs in 1982 recession in Germany suffered permanent earnings losses of 10-15% lasting at least 15 years. These estimates are obtained using data and methodology comparable to similar studies for the United States. Exploiting advantages of the German data, we also show that while reduction and recovery in time worked plays a role in explaining earnings losses during the first ten years, the majority of the long-run loss is due to a decline in wages. We also show that even the generous German unemployment insurance system replaced only a small fraction of the total earnings loss. These findings suggest that job displacements can lead to large and lasting reductions in income even in labor markets with tighter social safety nets and lower earnings inequality.

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File URL: http://www.econ.columbia.edu/RePEc/pdf/DP0910-07.pdf
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Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0910-07.

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Date of creation: 2009
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Handle: RePEc:clu:wpaper:0910-07
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