Twenty years to recover from layoffs

Filed in archive risk on August 5, 2009

How long does it take to recover from a layoff?

About 20 years, according to a new research paper. The researchers analyzed workers who were laid off in the 1980s and discovered that a decade later, they were still struggling to recover financially.

The paper says: "Those workers in stable employment from 1974 to 1979 who left their jobs in a mass-layoff during 1980 to 1986 had - compared to workers with no permanent job separation during that period - initial earnings losses of up to 30%. These losses decline to 20% after ten years but don't recover much more even 20 years after a job loss ... These findings suggest that earnings losses extend well beyond the five-year period typically studied and last up to 15-20 years after a displacement."

In other words, many of the retrenched employees might have found work but they were earning nowhere near what they once pulled in. Or perhaps they were sacked again.

While the paper focuses on layoffs in the 80s, the effect in today's market would be the same. And with US unemployment about to move into double digit territory, that would have enormous implications for long term welfare and unemployment insurance, not to mention lost productivity.

The study's findings suggest it's unsustainable.