Labor Market Networks and Recovery from Mass Layoffs: Evidence from the Great Recession Period

48 Pages Posted: 15 Jun 2015

See all articles by Judith K. Hellerstein

Judith K. Hellerstein

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)

Mark J. Kutzbach

Federal Deposit Insurance Corporation

David Neumark

University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Multiple version iconThere are 3 versions of this paper

Date Written: June 2015

Abstract

We measure the changing efficacy of neighborhood-based labor market networks, across the business cycle, in helping displaced workers become re-employed, focusing on the periods before, during, and just after the Great Recession. Networks can only be effective when hiring is occurring, and hiring varied greatly between 2005 and 2012, the period we study. We therefore focus on a measure of the strength of the labor market networks that includes not only the number of employed neighbors of a laid off worker, but also the gross hiring rate at that person’s neighbors’ workplaces. Our evidence indicates that local labor market networks increase re-employment following mass layoffs, and in particular, that networks serve to markedly increase the probability of re-employment specifically at neighbors’ employers. This is especially true for low-earnings workers. Moreover, although hiring and employment rates decreased during the Great Recession period, the productivity of labor market networks in helping to secure re-employment for laid off workers was remarkably stable during our sample period.

Suggested Citation

Hellerstein, Judith K. and Kutzbach, Mark J. and Neumark, David, Labor Market Networks and Recovery from Mass Layoffs: Evidence from the Great Recession Period (June 2015). NBER Working Paper No. w21262. Available at SSRN: https://ssrn.com/abstract=2618650

Judith K. Hellerstein (Contact Author)

University of Maryland - Department of Economics ( email )

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Mark J. Kutzbach

Federal Deposit Insurance Corporation ( email )

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David Neumark

University of California, Irvine - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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