Long-Term Joblessness and Earnings
March 2014The annual earnings of male workers who experienced long-term joblessness in the 1980–1982 twin recessions declined, on average, by more than 85 percent in the year following their job loss
Workers aged 25–55 who left their jobs voluntarily or involuntarily during this period had mean Social Security earnings of $29,781 in 1980 and estimated earnings losses of $25,499 in the year after their employment separation.
Long-term joblessness among these men had a persistent, negative association with subsequent earnings over a 20-year period
Twenty years after the job loss, average earnings were still not fully recovered and reflected a decline of 36 percent (an estimated loss of $10,710).
Removing individuals with pre-existing work limitations from consideration, the long-term reduction in earnings was smaller (particularly for voluntary job leavers) but still substantial
Among men who did not have a work limitation prior to separating from employment, the estimated loss of earnings after 20 years was 27 percent ($8,410).
Overall, these findings suggest that the impact of prolonged unemployment on earnings was not limited to the years immediately surrounding the job loss, but rather leads to substantial declines in long-term earnings, even for individuals without pre-existing health problems that limit work.
| Years relative to job loss | All jobless (n = 234) |
Involuntary (n = 140) |
Voluntary (n = 94) |
|---|---|---|---|
| -2 | 386 | -203 | 1,288 |
| -1 | -2,094 | -2,491 | -1,487 |
| 0 | -10,577 | -10,951 | -10,064 |
| 1 | -25,499 | -26,421 | -24,226 |
| 2 | -23,048 | -22,367 | -24,105 |
| 3 | -19,104 | -18,301 | -20,369 |
| 4 | -15,485 | -15,355 | -15,709 |
| 5 | -14,165 | -14,042 | -14,397 |
| 6 | -13,985 | -13,928 | -14,126 |
| 7 | -13,900 | -13,202 | -15,036 |
| 8 | -13,706 | -13,651 | -13,835 |
| 9 | -14,120 | -14,562 | -13,534 |
| 10 | -13,949 | -14,768 | -12,820 |
| 11 | -13,062 | -13,942 | -11,876 |
| 12 | -12,147 | -12,552 | -11,628 |
| 13 | -11,161 | -11,796 | -10,323 |
| 14 | -11,187 | -10,513 | -12,190 |
| 15 | -10,057 | -8,735 | -11,941 |
| 16 | -11,167 | -9,828 | -13,110 |
| 17 | -11,018 | -9,881 | -12,669 |
| 18 | -10,660 | -10,805 | -10,505 |
| 19 | -10,939 | -11,012 | -10,886 |
| 20 | -10,710 | -10,014 | -11,803 |
Background
- From 2007 to 2009, the United States economy went through the Great Recession, during which many individuals experienced long-term joblessness.
- The long-term effects of job loss on earnings can have significant implications for retirement security by reducing future Social Security benefits and savings.
- Examining the effects of the 1980 to 1982 recession on those who experienced long-term unemployment may provide insight into future patterns for individuals affected by the Great Recession.
Key Terms
- Long-term joblessness refers to unemployment lasting more than one year.
- Work limitation refers to a health condition limiting or preventing the type of work an individual can do.
- Involuntary job leavers are individuals who listed the reason for losing their last job as being laid off or discharged. Voluntary job leavers are those who listed any other reason./li>
SOURCE: Couch, Ken, Gayle Reznik, Christopher R. Tamborini, and Howard Iams. 2013. “Economic and Health Implications of Long-Term Unemployment: Earnings, Disability Benefits, and Mortality.” Research in Labor Economics 38: 259–305.
NOTES: These results are based on fixed-effects and propensity score matching methods, using data from the 1984 Survey of Income and Program Participation and longitudinal records from the Social Security Administration.
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