Discussion Paper

Wage Growth over Unemployment Spells

Abstract: This article looks at the wage growth associated with a spell of unemployment during the past three recessions. Our main findings are threefold. First, half of all unemployed workers experience a lower hourly wage once they regain employment. Second, afteran unemployment spell, older workers and those without a college degree experience lower wage growth. Third, workers who regain employment in a different industry than they were in previously tend to experience a substantial wage decline. The analysis suggests that the COVID-19 pandemic not only led to unprecedented job losses, but it could also result in sizable wage losses for a large fraction of unemployed workers as they return to employment.

Keywords: wage growth; unemployment spell; recession; industry switching; COVID-19;

JEL Classification: E24; J31;

https://doi.org/10.29338/ph2020-09

Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: Policy Hub*

Publication Date: 2020-07-13

Number: 2020-9