This study investigates how service delivery of employment-related federal programs administered at American Job Centers (AJCs) changes as local unemployment increases. The authors analyze the impact of such changes on labor market outcomes of program participants using data for the Trade Adjustment Assistance (TAA) participants. The authors find that the demand for TAA services increases substantially when local unemployment increases. A 5% to 10% increase in unemployment raises training enrollment through the TAA program by nearly 13 percentage points and increases participation duration by more than 9 weeks. Our results do not support the concern that a sudden rise in the demand for AJC services might deteriorate the quality of service delivery and outcomes. In fact, although increases in local unemployment are generally harmful to displaced workers, occupational training during this time is effective at reducing the size of wage loss by at least 46%, resulting in a 3.4% average increase for wage replacement rates.
Using data from the two cohorts of the NLSY, we examine whether income losses due to involuntary job separations have changed over time. We find that wage losses among men are similar between the two cohorts. However, women in the 1979 cohort show little evidence of wage losses while women in the 1997 cohort experience wage losses similar to those of men. We present evidence that changes in occupations across cohorts help explain these results.
The authors investigate the training choices made by workers entering the Trade Adjustment Assistance program and their postexit outcomes. This is important as more workers enter these types of programs due to technological change and globalization. Their study shows that workers that choose a training occupation beyond their skill level (skill overshooting) achieve higher earnings ($615 annually) and wage replacement rates (2.0 percentage points) at the cost of lower reemployment rates (−1.9 percentage points) immediately following program exit. An investigation of subsamples shows that skill overshooting is especially beneficial to females and those living in rural areas with earnings gains of $1,443 and $1,080, respectively, without hurting their chances of reemployment.
Income drops permanently after an involuntary job displacement, but it has never been clear what happens to long run wealth in the USA. Upon displacement, wealth falls 14% relative to workers of the same age and similar education from the Panel Study of Income Dynamics (PSID). Their wealth is still 18% lower 12 years after the event. A standard life cycle model calibrated to US data with permanent decreases in income after displacement behaves differently than these findings. The agents in the model also experience a large drop in wealth but they recover. The biggest culprit for these differences is small and statistically insignificant changes to consumption in the PSID whereas agents in the model decrease their consumption considerably. Extending the model to include habit formation reconciles some of these differences by generating similar long run effects on wealth. This allows for the examination of wealth at death through the lens of the model.
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