Jobless spells and re-employment wages

Many studies of job loss attribute the earnings losses associated with layoffs to the loss of job, occupation, and industry-specific human capital. This paper estimates the effect of jobless spells on post-layoff wages using data from the 1984 Panel of Survey on Income Participation for a sample of adult, white male workers who were permanently laid off between 1974 and 1984. The estimated impact of jobless spells on starting wages and survey date wages, several years after re-employment, are controlled for separations, layoffs, and quits and for individual and job characteristics. The estimates show that jobless spell durations reduce starting wages. Wage growth in the new job is lower for workers who experience long spell durations, a result that suggests acceptance of jobs which are poor matches compared to other workers who spend less time out of work following a layoff. The findings support labour force policies which minimize the amount of time a person is out of work.