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Don’t Look Down: New Evidence on Job Loss in a Flexible Labour Market

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  • Richard Upward
  • Peter Wright

Abstract

We estimate the earnings, hours and income effects of job loss (displacement) for a representative sample of UK workers from 1991--2007. We are able to follow workers before and after displacement regardless of their labour market state, and we are able to precisely match displaced workers with observably similar non-displaced workers. We show that job loss is associated with a long-run reduction in income which is mainly due to reductions in monthly pay conditional on employment rather than in employment propensity. Entry into unemployment is very short-lived, and while there is some entry into other labour market states, this does little to compensate for income losses. Total income from welfare payments, including unemployment insurance, retirement income and invalidity benefit reduces losses by only 15% in the first 12 months after job loss, and become even less important as time passes. The lack of a “safety net” means that job loss in the UK has a similar effect to job loss in the US.

Suggested Citation

  • Richard Upward & Peter Wright, 2015. "Don’t Look Down: New Evidence on Job Loss in a Flexible Labour Market," Discussion Papers 2015-10, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:15/10
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    File URL: https://www.nottingham.ac.uk/gep/documents/papers/2015/2015-10.pdf
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    Cited by:

    1. Fackler, Daniel & Rippe, Lisa, 2016. "Losing work, moving away? Regional mobility after job loss," IWH Discussion Papers 26/2016, Halle Institute for Economic Research (IWH).
    2. Fackler, Daniel & Hank, Eva, 2016. "Who buffers income losses after job displacement? The role of alternative income sources, the family, and the state," IWH Discussion Papers 28/2016, Halle Institute for Economic Research (IWH).
    3. Daniel Fackler & Eva Hank, 2016. "Who Buffers Income Losses after Job Displacement? The Role of Alternative Income Sources, the Family, and the State," SOEPpapers on Multidisciplinary Panel Data Research 863, DIW Berlin, The German Socio-Economic Panel (SOEP).
    4. Daniel Fackler & Lisa Rippe, 2017. "Losing Work, Moving Away? Regional Mobility After Job Loss," LABOUR, CEIS, vol. 31(4), pages 457-479, December.
    5. Dean Hyslop & Wilbur Townsend, 2017. "The longer term impacts of job displacement on labour market outcomes," Working Papers 17_12, Motu Economic and Public Policy Research.
    6. Daniel Fackler & Lisa Rippe, 2016. "Losing Work, Moving away? Regional Mobility after Job Loss," SOEPpapers on Multidisciplinary Panel Data Research 861, DIW Berlin, The German Socio-Economic Panel (SOEP).

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    Keywords

    Job loss; earnings; welfare payments;
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