A Review of the Recent Empirical Literature on Displaced Workers

Abstract

This article reviews the empirical literature on job displacement, which is generally defined as job loss arising from structural economic causes (as opposed to, for example, cyclical downturns) suffered by workers who are strongly attached to their economic sector and who have an exceptionally difficult time finding comparable employment following separation. Job displacement is widespread and strongly countercyclical (tending to peak during economic upturns), but concentrated in industries and states that are doing poorly, relative either to other industries and states or to their own prior performance. Displaced workers experience more nonemployment than do nondisplaced workers, but the difference fades after about four years. In contrast, earnings losses of displaced workers are large and persistent. Outcomes for all displaced workers are heavily influenced by broader economic conditions, and are affected very little by workers' demographic characteristics. The effects of advance notice are not yet clear.