Magazine article Economic Trends

Displaced Workers and the Great Recession

Magazine article Economic Trends

Displaced Workers and the Great Recession

Article excerpt

11.07.12

The Great Recession lasted six quarters, from December 2007 through June 2009, and as we all know, it took a large toll on the labor market. During the course of the recession, about 7.5 million jobs were lost in the nonfarm business sector. Job losses did not end until February 2010, by which point total jobs lost stood at about 8.7 million. More than two years since then and after three years of growth in the aggregate economy, employment recovered by 4.5 million, still short of the sharp decline we experienced. These numbers, however, do not tell us the whole story about those workers who suffered the job losses. How many of them eventually found jobs, and if they did, at what wage level and in which industries?

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Fortunately, we have some information about the answers to these questions from the Displaced Workers Survey (DWS), a biennial supplement of the monthly Current Population Survey (CPS), which provides us with the official unemployment rate every month. Both surveys are sponsored by Bureau of Labor Statistics (BLS). The BLS defines displaced workers as workers 20 years of age and older who lost or left jobs because their plant or company closed down or moved, there was insufficient work for them to do, or their position or shift was abolished. The BLS recently reported the summary statistics from the last DWS, which covers information about workers who were displaced between January 2009 and December 2011, and their labor market outcomes as of January 2012. Along with this 2012 release, two preceding reports, in 2010 and 2008, provide us with a complete picture of the job-loss experience of the displaced workers. One can think of the 2008 release of the DWS (which covers the period from January 2005 to December 2007) as representing "normal" times, and the 2010 release (which covers January 2007 to December 2009) as summarizing the recessionary period. One additional advantage of the DWS survey is that we can track tenured workers, those with at least three years of experience at their jobs before they were displaced. Arguably, these are the workers who will pay a higher price in terms of human capital loss than workers with very short tenure.

Reason for Job Loss: Displaced Workers

                                       2008   2010   2012

Employed                                24%    43%    39%

Plant or company closed down or moved   45%    30%    31%

Position or shift abolished             31%    27%    30%
Source: Bureau of Labor Statistics.

Note: Table made from pie chart.

Earnings of Displaced Workers

                                       2008  2010   2012

20 percent or more above                21%   16%    18%

20 percent or more below                25%   36%    33%

Below, but within 20 percent            20%   19%    21%

Equal or above, but within 20 percent   34%   29%    28%
Source: Bureau of Labor Statistics.

Note: Table made from pie chart.

With this classification in mind, the effects of the recession in terms of job loss are very obvious in these data. There were only 3.6 million displaced workers in the 2008 survey, whereas the number jumped to 6.9 million in the 2010 survey. Even the latter half of the recession and the early part of the recovery, summarized in the 2012 survey, do not seem to be immune to job losses; during this period about 6.1 million workers were displaced from January 2009 through December 2011. Moreover, those who were displaced between January 2007 and December 2009 were the least likely of all the workers displaced during the three survey periods to be employed in the following January, 48. …

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