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Heterogeneous Scarring Effects of Full-Year Nonemployment

Fatih Guvenen¹; Fatih Karahan²; Serdar Ozkan³; Jae Song⁴

¹ Department of Economics, University of Minnesota, 4-101 Hanson Hall, 1925 S Fourth Street, Minneapolis, MN 55455, and NBER (e-mail: ) · ² Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045 (e-mail: ) · ³ University of Toronto, Max Gluskin House, 150 St. George Street, Toronto, ON Canada M5S 3G7 (e-mail: ) · ⁴ Social Security Administration, 5107 Leesburg Pike, Suite 1400 Falls Church, VA 22041 (e-mail: )

Drawing on administrative data from the Social Security Administration, we find that individuals that go through a long period of non-employment suffer large and long-term earnings losses (around 35-40 percent) compared to individuals with similar age and previous earnings histories. Importantly, these differences depend on past earnings, and are largest at the bottom and top of the earnings distribution. Focusing on workers that are employed 10 years after a period of long-term non-employment, we find much smaller earnings losses (8-10 percent). Furthermore, the large earnings losses of low-income individuals are almost entirely due to employment effects.

DOI

10.1257/aer.p20171012

Volume

107 (5)

Pages

369-373

Language

en

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