Structural earnings losses and between-industry mobility of displaced workers, 2003-2008

This article investigates structural sources of earnings losses in the U.S. labor market, analyzing data from the Outgoing Rotation Groups and Displaced Worker Supplements of the 2003-2008 Current Populations Survey. After introducing the data and methodology, a descriptive model of inter-industry earnings differentials in the full labor market between 2003 and 2008 is presented to motivate a baseline claim that industry of employment represents a salient partition of the distribution of good and bad jobs over this time period. Then, the current wages of two groups of workers in 2006 and 2008, who were displaced from their jobs in the prior 3 years, are modeled. Earnings losses of re-employed workers are analyzed, conditional on re-employment in alternative industries, while simultaneously adjusting for observed determinants of selection into employment. The findings demonstrate that displaced workers who are then re-employed suffer from earnings losses in their new jobs. These losses are larger among those who switch industries, especially among those who move to traditional low-wage industries in the service sector. The losses are also larger for those who held their prior jobs for 3 or more years, and they cannot be explained away by differences in the skill requirements between the jobs from which individuals are displaced and those in which they are re-employed. The findings are discussed with reference to structural theories of labor market inequality from sociology and economics, which represent valuable complementary perspectives to individualistic skill-based accounts of earnings differences.