Displaced workers are faster to find jobs at new employers

“The empirical literature on the relationship between job mobility and earnings dynamics emphasize two distinctly different patterns. On the one hand are findings that job mobility yields increases in earnings for workers” write Bruce Fallick, John Haltiwanger, and Erika McEntarfer in Job-to-Job Flows and the Consequences of Job Separations (Choosen excerpts by JMM to follow)

This view emphasizes that, especially for young workers, building a career (or finding a career) often involves job mobility. On the other hand, the displaced worker literature emphasizes the persistent earnings losses associated with workers who separate from distressed firms (firms undergoing major downsizings through plant closings or large contractions).

For such displaced workers, an important element of adjustment is that it takes time to find new matches, so it is argued that displacement is often followed by a spell of joblessness. In a related fashion, separations beget separations as the new matches made after the initial displacement are relatively unstable.

These two views are not inherently in conflict but they do offer quite different perspectives on the impact of economic turbulence on the career path of workers. It is now well known that worker flows in terms of accessions and separations are very large in dynamic economies like the U.S. The average accession and separation rates are around 18 percent per quarter in the U.S. About a third to a half of that worker reallocation is associated with job reallocation – the reallocation of employment opportunities across employers – while the remainder is due to the many other events that produce worker transitions in the labor market. Given the turbulence of workers and jobs, it is important to understand the implications of this turbulence for the earnings and employment outcomes of the workers involved.

This paper extends the literature on the earnings losses of displaced workers to provide a more comprehensive picture of the earnings and employment outcomes for workers who separate. First, the authors compare workers who separate from distressed employers (presumably displaced workers) and those who separate from stable or growing employers. Second, they distinguish between workers who do and do not experience a spell of joblessness. Third, they examine the full distribution of earnings outcomes from separations – not the impact on only the average worker.

The authors find that earnings outcomes depend much less on whether a job separation is associated with a distressed employer than on whether the separator experienced a jobless spell after the separation.

Moreover, they find that workers separating from distressed firms are faster to find jobs at new employers than are other separators.

via FRB: FEDS Abstract 2012-73.