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How Replaceable Is a Low-Wage Job?

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  • Evan K. Rose
  • Yotam Shem-Tov

Abstract

We study the long-run consequences of losing a low-wage job using linked employer-employee wage records and household surveys. For full-time workers earning $15 per hour or less, job loss due to an idiosyncratic, firm-wide contraction generates a 13% reduction in earnings six years later and over $40,000 cumulative lost earnings. Most of the long-run decrease stems from reductions in employment and hours as opposed to wage rates: job losers are twice as likely to report being unemployed and looking for work. By contrast, workers initially earning $15-$30 per hour see comparable long-run earnings losses driven primarily by reductions in hourly wages. Calibrating a dynamic job ladder model to the estimates implies that the rents from holding a full-time $15 per hour job relative to unemployment are worth about $20,000, more than seven times monthly earnings.

Suggested Citation

  • Evan K. Rose & Yotam Shem-Tov, 2023. "How Replaceable Is a Low-Wage Job?," NBER Working Papers 31447, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31447
    Note: LS PE
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    More about this item

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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