Earnings Losses of Job Losers During the 2001 Economic Downturn

When he co-wrote this article, Vilas Rao was a research analyst in the Research Department of the Philadelphia Fed. He is now a graduate student at the Kennedy School of Government, Harvard University. ob losses may involve not only lost earnings during unemployment but also declines in earnings at subsequent jobs. After a timeconsuming job search, workers may need to restart their careers from scratch, accepting a lower wage. Workers may also need time to acquire new skills, and total earnings lost during such a period of re-adjustment can be considerable. But experiences may vary widely. In this article, using a novel data set, Shigeru Fujita and Vilas Rao provide evidence on earnings losses after unemployment. Although the usefulness of the evidence is limited by the short sample period, the data set allows us to ask some important questions, the answers to which may help inform us about important macroeconomic issues such as the cost of business-cycle fluctuations and the benefits of policies intended to avoid such fluctuations.