Reduction in income after a layoff can follow you for years

skydivingIf you're unemployed, don't expect your next job to pay as well as your last job. And expect it to take years, if ever, for your salary to bounce back after a layoff. That's the bad news in a recent New York Times story that cites a working paper by an economics professor at Columbia University.

Being laid off during a recession makes it more difficult for workers to see their earnings bounce back than if they were laid off in better times, the Times reported. Income reduction can last for as long as two decades for people let go in a recession, economists said.

"On average, most workers do not recover their old annual earnings," said Til von Wachter, the Columbia University economics professor who, with two other economists, examined the long-term earnings of workers who lost their jobs in the recession of the early 1980s.

Wachter studied workers who had been with their companies at least three years and lost their jobs when their employers cut their work force by at least 30%. Even 20 years later, most had not returned to their old wage levels, earnings 15% to 20% less than they would have been had they not been laid off.

Going to the bottom of the totem pole at a new job in a new industry is partly why salaries don't return to previous levels as quickly. The economists also found that workers who are laid off are more likely to be laid off again.

As someone who was laid off in June 2008 during the recession, my first layoff, and who continues looking for full-time work, seeing those statistics is enough to make me want to write my own working paper about how difficult it is to find a job while discouraged by such dismal statistics.

Aaron Crowe is a freelance journalist in the San Francisco Bay Area. Reach him at www.AaronCrowe.net

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