Earnings Losses after Non-Employment Increase with Age

Schmalenbach Business Review, Vol. 64, January 2012, pp. 2-19

18 Pages Posted: 4 Apr 2012

See all articles by Thomas Zwick

Thomas Zwick

University of Würzburg - Business Administration & Economics; Centre for European Economic Research (ZEW); Maastricht University - Research Centre for Education and the Labour Market (ROA)

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Date Written: January 15, 2012

Abstract

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

Zwick, Thomas, Earnings Losses after Non-Employment Increase with Age (January 15, 2012). Schmalenbach Business Review, Vol. 64, January 2012, pp. 2-19. Available at SSRN: https://ssrn.com/abstract=2034471

Thomas Zwick (Contact Author)

University of Würzburg - Business Administration & Economics ( email )

Sanderring 2
Wuerzburg, D-97070
Germany

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Maastricht University - Research Centre for Education and the Labour Market (ROA) ( email )

P.O. Box 616
Maastricht, MD6200
Netherlands

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