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Earnings Losses of Displaced Older Workers: Accounting for the Retirement Option

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  • Schirle, Tammy

Abstract

In this paper I estimate the magnitude of earnings losses faced by workers who are displaced when over the age of 50. This is potentially complicated by the self-selection of older individuals out of the labour force and into activities such as retirement, preventing observation of their potential earnings losses. Using data from the Survey of Labour and Income Dynamics (1993-2004), I use a Heckman selection model that accounts for individuals’ departure from the labour force following displacement. Results indicate that self-selection is an important factor to consider when studying the earnings of older workers but does not bias estimates of earnings losses due to displacement. Further, the results suggest that workers over 50 do not face larger earnings losses upon displacement than 35-49 year olds. Losses are only slightly larger than that experienced by 25-34 year olds. Consistent with the existing literature, those workers displaced over 50 with high tenure on the lost job experience the largest earnings losses.

Suggested Citation

  • Schirle, Tammy, 2009. "Earnings Losses of Displaced Older Workers: Accounting for the Retirement Option," CLSSRN working papers clsrn_admin-2009-17, Vancouver School of Economics, revised 16 Feb 2009.
  • Handle: RePEc:ubc:clssrn:clsrn_admin-2009-17
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    File URL: http://www.clsrn.econ.ubc.ca/workingpapers/CLSRN%20Working%20Paper%20no.%2010%20-%20Tammy%20Schirle.pdf
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    References listed on IDEAS

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    1. Rafael Gomez & Eric Santor, 2001. "Membership has its privileges: the effect of social capital and neighbourhood characteristics on the earnings of microfinance borrowers," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 943-966, November.
    2. Kathleen Day & Rose Annue Devlin, 1998. "The Payoff to Work without Pay: Volunteer Work as an Investment in Human Capital," Canadian Journal of Economics, Canadian Economics Association, vol. 31(5), pages 1179-1191, November.
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    4. Freeman, Richard B, 1997. "Working for Nothing: The Supply of Volunteer Labor," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages 140-166, January.
    5. Carol Woodhams & Susan Corby, 2007. "Then and Now: Disability Legislation and Employers' Practices in the UK," British Journal of Industrial Relations, London School of Economics, vol. 45(3), pages 556-580, September.
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    Cited by:

    1. Riddell, W. Craig, 2011. "Unemployment Compensation and Adjustment Assistance for Displaced Workers: Policy Options for Canada," CLSSRN working papers clsrn_admin-2011-31, Vancouver School of Economics, revised 22 Dec 2011.
    2. Jones, Stephen, 2012. "The Effectiveness of Training for Displaced Workers with Long Prior Job Tenure," CLSSRN working papers clsrn_admin-2012-3, Vancouver School of Economics, revised 29 Jan 2012.

    More about this item

    Keywords

    Layoffs; Wage Level; Wage Structure; Retirement; Retirement Policies;

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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