Are Displaced Workers Now Finished at Age Forty?

Daniel Rodriguez and Madeline Zavodny
Economic Review, Vol. 85, No. 2, 2000

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In recent years, the media has devoted considerable attention to the effects of downsizing and corporate restructuring on U.S. workers. Economists as well as the media have focused in particular on the plight of laid-off, or "displaced," middle-aged workers. Because many displaced workers incur significant costs, the displacement rate and the effects of displacement on workers are of concern to policymakers.

The conventional wisdom that middle-aged workers face an increased risk of being displaced and increased difficulties after displacement is partially borne out by this article's analysis. Displacement rates among middle-aged workers rose relative to younger workers during the 1990s recession, and the relative likelihood of displacement for middle-aged workers has not returned to the levels of the 1980s. Thus, workers in their forties are relatively more likely to have been displaced in the 1990s than in the 1980s. However, the two postdisplacement outcomes examined here, reemployment and earnings losses, have not changed significantly over time for older workers relative to younger workers.

According to the authors, the data also suggest that much of the concern about displacement may soon begin to abate. Displacement rates during 1995–97 returned to levels similar to those during the 1980s expansion. Reemployment rates for workers displaced during 1995–97 were at their highest levels for all age groups since the mid-1980s, and the gap between pre- and postdisplacement earnings has shrunk during the most recent period.

June 2000