Displaced Workers Face Tough Labor Market

Trouble finding jobs; many take pay cuts

For Immediate Release: July 19, 2004 

Contact: Debi Kar, 202- 387-5080 

A sizeable portion of displaced American workers have had difficulty finding new work, and have often taken significant pay cuts in their new jobs, according to a new study from the Center for Economic and Policy Research. These findings are particularly important in light of the unprecedented low net job creation of the past three years and the sensitivity of this issue in the 2004 elections. This new report by economist and CEPR Senior Research Associate John Schmitt, “Job displacement over the Business Cycle, 1991-2001,” examines the Displaced Workers Survey (DWS) data released by the Bureau of Labor Statistics.

In any given three-year period covered by the survey, on average, about 4 million workers, or about 3 percent of the US work force, had been displaced at least one time. Between 6 and 11 percent of workers were displaced at one point during the eleven-year period covered by the five versions of the survey examined.

Finding another job after being displaced was difficult for most workers. Almost one quarter of those displaced had not worked between the time of their job loss and the time they were interviewed for the DWS. Those who did eventually find work were unemployed for an average of 14 weeks. Of the full-time workers who were displaced, only 72 percent had a job at the time they were interviewed for the DWS, and just 64 percent were back in full-time jobs. Older workers found it particularly difficult to find new work.

Further, displaced workers were often forced to take a pay cut in their new jobs. About 40 percent of all displaced, full-time workers were in full-time jobs that paid less than the job they lost, with about 20 percent of them in jobs that required taking a pay cut of 20 percent or more relative to the job they lost.

About half of displaced workers did not receive unemployment benefits. Of those who did receive unemployment, almost a quarter remained unemployed so long that they exhausted their benefits.

Less than half of displaced workers were given advanced notification that they were being dismissed.

Workers’ education levels had only a limited impact on job displacement. Those with a high school degree or less had a 3.3 percent chance of being displaced over any three-year period, while those with a college education had a 2.9 percent displacement rate over the same period.