Thursday, April 19, 2012

Layoff costs

In general, I think people view the costs of a job loss, as equivalent to the wages lost when they were out of work and looking for employment.

There are other factors involved, including career disruption, and often lowered income at the new place of employment.

Recessions and the Costs of Job Loss (pdf)
Steven J. Davis, Till von Wachter, prepared for Brookings Institute, 23 November 2011 (Hat tip: MR)

In present value terms, men lose an average of 1.4 years of pre-displacement earnings if displaced in mass layoff events that occur when the national unemployment rate is below 6 percent. They lose a staggering 2.8 years of pre-displacement earnings if displaced when the unemployment rate exceeds 8 percent.

And as I noted, the losses continue after re-employment:

Average Annual Earning Loss as % (from page 18)

I imagine the cost of getting mad at your boss and quiting in a huff are pretty similar: on the plus side you don't have a large cohort of similarly employed people looking for work, but at the same time you are going to have to skate around why you left your last employer.


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