Earnings Losses after Non-Employment Increase with Age
Schmalenbach Business Review, Vol. 64, January 2012, pp. 2-19
18 Pages Posted: 4 Apr 2012
Date Written: January 15, 2012
This paper shows that after older workers experience periods of non-employment, earnings losses increase. Before non-employment, older employees have relatively higher earnings compared to younger employees without employment interruptions. This earnings advantage turns into a strong earnings disadvantage shortly before, and for a long time after, unemployment. Younger people who lose their jobs have a relatively stable, small earnings disadvantage before non-employment and quickly earn more than those without employment interruptions. The earnings effect of returning to the same employer after non-employment suggests that more involuntary work interrup- tions for older employees better explains the results than the loss of an implicit contract or specific human capital.
Keywords: Age, Earnings Losses, Non-Employment
JEL Classification: C3, J31, J40
Suggested Citation: Suggested Citation