EconSouth (First Quarter)


BOOK REVIEW


Examining the Job
Loss Phenomenon

 

 

Job displacement and wage loss have become staples of the national dialogue as politicians, mindful of the approaching election, attempt to capitalize on the strong feelings the issues arouse. Although this topic has become a hot-button issue in the United States only as the so-called jobless recovery has gone on, the situation has been going on for years and in many different countries. Losing Work, Moving On is editor Peter Kuhn’s attempt to move past the visceral emotions of the phenomenon and look at issues associated it.

This edited volume of five separate empirical analyses is concerned with job displacement and wage loss in 10 different developed economies. The countries analyzed are the United States, the Netherlands, Japan, Canada, France, Germany, Australia, Belgium, Denmark, and the United Kingdom. While the book contains independent research efforts, Kuhn provides an exhaustive summary and synthesis of the research results in the introductory chapter.

For anyone interested in learning more about the condition of displaced workers in different work environments and the empirical issues that confront a researcher trying to characterize those conditions, this book is a must-read. Indeed, the book was named an Outstanding Academic Title by Choice magazine in 2003. Since the data from several countries in the study are rather dated, however, it is not as useful for learning about the current environment in which displaced workers find themselves.

The book sets out to address two fundamental questions: How similar or different are the experiences of displaced workers in the United States and other developed economies, and what can we learn from these similarities and differences? The goal in answering these questions is to determine whether there are fundamental features common to industrialized economies that result in similar experiences among displaced workers and whether these differences point to differences in effectiveness of various policies directed toward displacement.

Lessons learned

The book outlines what seem to be some universal patterns of displacement experiences across the employment protection law environments of different countries.

The studies in the book show there is tremendous variation in the combination of institutions that have an impact on displacement across countries. Kuhn offers methodological lessons for conducting cross-sectional international comparisons of labor market dynamics. These lessons include the need for consistency of definitions (for example, what “displaced” means) and understanding the nuances of different languages crucial to the comparison across countries. Also, while a common set of causal factors can be important for cross-country statistical comparisons, an expanded set of causal factors, according to the text, should also be exploited when available. Kuhn points out some controversy about how important it is to have a “control group”—workers from the same firm who were not laid off—when trying to measure the impact of displacement.

The analyses suggest that consideration of post-displacement experiences should allow for more narrowly defined outcomes than merely labor market withdrawal and re-employment. For example, early retirement, formal disability, and nontraditional forms of employment are found to be important outcomes worthy of further examination to fully capture the breadth of a displaced worker’s experience.

Common ground
The book outlines what seem to be some universal patterns of displacement experiences across different employment protection law environments. While the outcomes may not be novel in and of themselves, their universality across countries is notable. Women, for example, experience a lower incidence of displacement, greater post-displacement joblessness, and about the same post-displacement wage loss as men. Younger workers experience a greater incidence of displacement, less post-displacement joblessness, and lower post-displacement wage loss than older workers.

An assessment across all dimensions and countries points to the greatest burden of displacement being borne by older and unskilled workers.

An assessment across all dimensions and countries points to the greatest burden of displacement being born by older and unskilled workers. Another notable finding is that the longer a displaced worker is unemployed, the harder it becomes for him or her to escape joblessness.

These findings show that there are limited consistent relationships between displacement experiences and labor market structures and policies. Across the book’s five studies, total displacement rates are remarkably similar in countries with very different employment protection laws. The experience of post-displacement joblessness, however, does vary dramatically across countries.

Finally, while post-displacement wage gains among workers with low tenure are found across countries, the large wage losses experienced by more senior workers, according to the studies, are concentrated in Canada, the United States, and the United Kingdom. The primary characteristics that set these three countries apart from the others are their decentralization of wage-setting institutions (for example, less unionization) and the presence of greater wage inequality.

Overall, there doesn’t seem to be any connection between strong employment protection laws and the incidence of displacement, but strong employment protection laws are shown to have a greater impact on the form of displacement (for example, layoffs versus mandatory outplacements) and on the consequences of displacement (such as joblessness and wage loss).

Worth a read
Losing Work, Moving On is an impressive compilation of five significant studies. The only drawback to the work presented is the dated nature of the data on some countries. For the reader who wants to understand the complex issues of job displacement on a global stage, however, the book is worthwhile. This subject will continue to gain attention in the fast-evolving, globally integrated economy, and readers can benefit from Kuhn’s dispassionate analysis of the relevant data.

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