Earnings Losses of Displaced Workers in the 1990s

The large-scale downsizings of the 1990s has renewed interest in the earnings losses of displaced workers. This study uses administrative data to follow 833,004 workers in California between 1989 and 1994, providing estimates of the extent of losses in quarterly earnings associated with the recent downsizings. Patterns of earnings loss that are similar to those found in studies using different data for different regions and periods are documented. However, we do not find that earnings decline substantially prior to displacement, which has been found in previous research. The study also finds that earnings losses: (1) vary substantially among workers, (2) differ by the period of displacement, (3) are related to the economic conditions at the time of displacement, (4) vary by firm size, industry of new employment, and the number of subsequent separations, (5) are similar within versus across firms, and (6) in the long-run are 17 to 25 percent. The effects on quarterly earnings versus hourly wages are also explored.