How Replaceable Is a Low-Wage Job?

Evan K. Rose and Yotam Shem-Tov

No 31447, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the long-run consequences of losing a low-wage job using linked employer-employee wage records and household surveys. For full-time workers earning $15 per hour or less, job loss due to an idiosyncratic, firm-wide contraction generates a 13% reduction in earnings six years later and over $40,000 cumulative lost earnings. Most of the long-run decrease stems from reductions in employment and hours as opposed to wage rates: job losers are twice as likely to report being unemployed and looking for work. By contrast, workers initially earning $15-$30 per hour see comparable long-run earnings losses driven primarily by reductions in hourly wages. Calibrating a dynamic job ladder model to the estimates implies that the rents from holding a full-time $15 per hour job relative to unemployment are worth about $20,000, more than seven times monthly earnings.

JEL-codes: J01 J64 (search for similar items in EconPapers)
Date: 2023-07
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