Date Added: Nov 2009
The authors show that workers displaced from their stable jobs during mass-layoffs in 1982 recession in Germany suffered permanent earnings losses of 10-15% lasting at least 15 years. These estimates are obtained using data and methodology comparable to similar studies for the United States. Exploiting advantages of the German data, they also show that while reduction and recovery in time worked plays a role in explaining earnings losses during the first ten years, the majority of the long-run loss is due to a decline in wages. They also show that even the generous German unemployment insurance system replaced only a small fraction of the total earnings loss.