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Labour Market Matters - December 2012

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  • Tran, Vivian

Abstract

It is well-documented that workers displaced from long-tenure jobs tend to have difficulty finding new employment, and face even greater difficulty finding a job without suffering a substantial loss in earnings. Workers with significant prior tenure typically undergo substantial earnings losses, with mean losses of 25-35 percent for those with at least five years’ tenure. Such earnings losses have been found to be persistent even five years after the displacement. Earnings losses suffered by displaced long-tenure workers tend to be large and may be permanent. Policies to address problems faced by displaced long-tenure workers tend to be centred on education, training and skill development. A report by CLSRN affiliate Stephen Jones (McMaster University) entitled “The Effectiveness of Training for Displaced Workers with Long Prior Job Tenure†(CLSRN Working Paper no. 92)* cautions that research shows returns to training for displaced workers that are low, being significantly less than the returns to formal schooling which lie in the 6-9% range. On a cost-benefit basis, the body of evidence does not show that training pays off for most of the displaced population. How does a firm’s decision to engage in employee training react to economic fluctuations? During downturns, lower productivity (a “negative productivity shock†) can be associated with increased training, as the opportunity cost to train workers is lower. However, increased productivity (a “positive productivity shock†) can be related to the adoption of new technologies that may require training, which can create increased return to skill. Currently, there is little evidence to prove which of the two scenarios holds more accurately over the other. In a paper entitled “The Impact of Aggregate and Sectoral Fluctuations on Training Decisions†(CLSRN Working Paper no. 45) CLSRN affiliates Vincenzo Caponi (Ryerson University), Cevat Burc Kayahan (Acadia University), and Miana Plesca (University of Guelph) examine how the firm-level decision to train depends on aggregate and sectoral output fluctuations, and find that more training tends to happen during downturns, and that training is generally higher in sectors that are doing relatively better than others.

Suggested Citation

  • Tran, Vivian, 2012. "Labour Market Matters - December 2012," CLSSRN working papers clsrn_admin-2012-37, Vancouver School of Economics, revised 27 Dec 2012.
  • Handle: RePEc:ubc:clssrn:clsrn_admin-2012-37
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    File URL: http://www.clsrn.econ.ubc.ca/Labour%20Market%20Matters%20-%20December%202012.pdf
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    References listed on IDEAS

    as
    1. Gregory Lewis, 2011. "Asymmetric Information, Adverse Selection and Online Disclosure: The Case of eBay Motors," American Economic Review, American Economic Association, vol. 101(4), pages 1535-1546, June.
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    3. Peter Kuhn & Mikal Skuterud, 2004. "Internet Job Search and Unemployment Durations," American Economic Review, American Economic Association, vol. 94(1), pages 218-232, March.
    4. Jeffrey R. Brown & Austan Goolsbee, 2002. "Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 481-507, June.
    5. Fiona Morton & Florian Zettelmeyer & Jorge Silva-Risso, 2003. "Consumer Information and Discrimination: Does the Internet Affect the Pricing of New Cars to Women and Minorities?," Quantitative Marketing and Economics (QME), Springer, vol. 1(1), pages 65-92, March.
    6. Goolsbee, Austan, 2001. "Competition in the Computer Industry: Online versus Retail," Journal of Industrial Economics, Wiley Blackwell, vol. 49(4), pages 487-499, December.
    7. Raven E. Saks, 2005. "Job creation and housing construction: constraints on metropolitan area employment growth," Finance and Economics Discussion Series 2005-49, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Training; Compensation; Economic Fluctuations; Public Policy;

    JEL classification:

    • P36 - Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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