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Recessions and the Annual Labor Market Earnings of Vulnerable Workers: New Evidence using Longitudinal Administrative Earnings Data

March 2011

H. Luke Shaefer, University of Michigan

Download 'working_paper11-05.pdf'.


Little is known about how recessions impact the labor market earnings of specific groups of vulnerable workers, particularly low-educated workers and minorities. Focusing on the recession of 1990-1991, this study seeks to identify the extent of earnings losses associated with this recession, and the extent and speed at which the earnings of vulnerable workers recovered following the recession, relative to more advantaged comparison groups. Data are drawn from the U.S. Census Bureau’s Gold Standard restricted-use dataset, which links observations from the Survey of Income and Program Participation (SIPP) with longitudinal labor market earnings from the Social Security Administration. Examining a fixed sample of adult workers for the period 1987-1999, I find that low-educated workers saw substantial declines in annual earnings relative to high-educated workers during recession years. While the full study frame was marked by declines in relative earnings for low-educated workers, losses were particularly severe during the recession years. After controlling for education, there is no clear evidence that minorities are differentially impacted by recessions relative to non-Hispanic whites.

Discrimination, Employment, Unemployment, and the Labor Market