Storms and Jobs: The Effect of Hurricanes on Individuals’ Employment and Earnings Over the Long Term

76 Pages Posted: 21 May 2016 Last revised: 24 May 2016

See all articles by Jeffrey Groen

Jeffrey Groen

Bureau of Labor Statistics

Mark J. Kutzbach

Federal Deposit Insurance Corporation

Anne Elise Polivka

Bureau of Labor Statistics

Date Written: May 1, 2016

Abstract

Hurricanes Katrina and Rita devastated the U.S. Gulf Coast in 2005, destroying homes and businesses and causing mass evacuations. The economic effects of disasters are often studied at a regional level, but little is known about the responsiveness of individuals’ employment and earnings to the damages, disruption, and rebuilding — particularly in the longer run. Our analysis is based on data that tracks workers over nine years, including seven years after the storms. We estimate models that compare the evolution of earnings for workers who resided in a storm-affected area with those who resided in a suitable control counties. We find that, on average, the storms reduced the earnings of affected individuals during the first year after the storm. These losses reflect various aspects of the short-run disruption caused by the hurricanes, including job separations, migration to other areas, and business contractions. Starting in the third year after the storms, however, we find that the earnings of affected individuals outpaced the earnings of individuals in the control sample. We provide evidence that the long-term earnings gains were the result of wage growth in the affected areas relative to the control areas, due to reduced labor supply and increased labor demand, especially in sectors related to rebuilding. Despite the short-term earnings losses, we find a net increase in average quarterly earnings among affected individuals over the entire post-storm period. However, those who worked in sectors closely tied to tourism or the size of the local population experienced net earnings losses.

Keywords: Disaster, Hurricane, Employment, Earnings, Local Labor Markets, Katrina, Rita

JEL Classification: J60, Q54, R23

Suggested Citation

Groen, Jeffrey A. and Kutzbach, Mark J. and Polivka, Anne E., Storms and Jobs: The Effect of Hurricanes on Individuals’ Employment and Earnings Over the Long Term (May 1, 2016). US Census Bureau Center for Economic Studies Paper No. CES-WP-15-21R, Available at SSRN: https://ssrn.com/abstract=2782038 or http://dx.doi.org/10.2139/ssrn.2782038

Jeffrey A. Groen (Contact Author)

Bureau of Labor Statistics ( email )

2 Massachusetts Avenue, NE
Washington, DC 20212
United States

Mark J. Kutzbach

Federal Deposit Insurance Corporation ( email )

550 17th Street NW
Washington, DC 20006

Anne E. Polivka

Bureau of Labor Statistics ( email )

2 Massachusetts Avenue, NE
Office of Employment Research and Program Development Suite 4945
Washington, DC 20212
United States
(202) 691-7395 (Phone)
(202) 691-7425 (Fax)

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