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Age Differences in Job Loss, Job Search, and Reemployment

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Document date: January 12, 2011
Released online: January 12, 2011

Abstract

Working longer is often hailed as the best way to increase retirement incomes, yet this strategy depends crucially on seniors' ability to find work and hold on to their jobs. This study examines how the incidence and consequences of job displacement vary by age. Results show that older workers are less likely than younger workers to lose their jobs, but only because they generally have spent more time with their employers. When older workers lose their jobs, it takes them longer than their younger counterparts to become reemployed, and when they do find work they generally experience sharp wage declines.

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Introduction

As the population ages, the employability of older adults is becoming increasingly important. Adults age 50 and older made up 31 percent of the labor force in 2010, up from 20 percent in 1995. If labor force participation rates at older ages continue to grow at their 1999 to 2009 pace, by 2019 adults age 50 and older will account for 35 percent of the labor force. Working longer is often hailed as the best way to increase retirement incomes (Munnell and Sass 2008), yet the strategy depends crucially on seniors' ability to find work and hold on to their jobs. Being out of work is especially serious for older workers who are too young to qualify for Social Security retirement benefits, which provides an important lifeline for nonworking adults age 62 and older (Johnson and Mermin 2009). Questions about the employability of older adults are particularly relevant in the wake of the Great Recession of 2007??09, when the demand for labor remains weak and unemployment rates are near record highs.

Job loss is an inevitable consequence of a dynamic economy. Employers must be able to shed jobs in response to changing market conditions, and their ability to do so at relatively low cost encourages them to hire more employees. Workers in declining industries often lose their jobs, but growing sectors provide new employment opportunities. Although job creation and destruction help distribute resources efficiently and promote economic growth, this dynamic process can impose significant costs on individual workers. Displaced workers forfeit wages, sometimes for extended periods, and the stress of being out of work takes financial, physical and emotional tolls on the unemployed. The consequences of job loss may be especially serious for older workers, who may encounter more difficulty finding jobs than their younger counterparts.

This study uses recent longitudinal data from the Survey of Income and Program Participation (SIPP) to examine how the incidence and consequences of job loss vary by age. Models measure the likelihood that workers lose their jobs through no fault of their own and the likelihood that displaced workers become reemployed. We also compare earnings and other job characteristics before and after job loss for displaced workers who become reemployed. Final tabulations compare job search activities by age for unemployed workers. Results show that older workers are less likely than younger workers to lose their jobs, but only because they generally have spent more time with their employers. Older workers who become displaced spend more time unemployed than their younger counterparts and experience greater wage losses when they become reemployed. These findings suggest that some employers are reluctant to hire older workers, and raise questions about the employability of older adults.

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Topics/Tags: | Employment | Retirement and Older Americans


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