Monday, May 9, 2016

Layoffs Have Negative Effects On Rehired Workers: Lower Future Earnings And Lower Home Ownership

From The Wall Street Journal, "The Recession’s Economic Trauma Has Left Enduring Scars: Effects of losing a job linger, from lower wages and home ownership rates to psychological problems" by Ben Leubsdorf:
Even for the millions of Americans back at work, the effects of losing a job will linger, the research suggests. They will earn less for years to come. They will be less likely to own a home. Many will struggle with psychological problems. Their children will perform worse in school and may earn less in their own jobs.[Emphasis added.]
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Labor Department data show 40 million layoffs and other involuntary discharges during the recession that began in December 2007 and ended in June 2009. The official unemployment rate peaked at 10%. Princeton University economist Henry Farber calculated that the rate of job loss from 2007 through 2009 was 16%.

Wage scarring
As in previous recessions, millions of Americans faced a phenomenon economists sometimes call wage scarring. People who lose a job, even during economic expansions, usually earn less money when they re-enter the workplace. They are out of work for a time and often take a pay cut as the price of returning to work at a new employer or even in a new career.
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Average Annual Wages Of Rehired Laid Off Workers
Source: The Wall Street Journal

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