Job changing after displacement: a contribution to the advance notice debate.

• Author: Addison, John T.

1. Introduction

   Considerable research effort has been devoted to modeling the effects of advance notice on postdisplacement outcomes within the framework set by the biennial Displaced Worker Surveys. Yet the mechanisms through which advance notice achieves the benefits attributed to it have been little explored in the literature. The standard argument that notice facilitates job finding by |bringing forward' search is of course consistent with the empirical conclusion from "first generation" studies that (broadly defined) notice reduced postdisplacement joblessness but had no discernible impact on postdisplacement wages.[1] But as an explanation it fails to address the empirical suggestion of time varying effects[1; 8] while glossing over the sensitivity of the unemployment result to sample construction and model specification. The picture has become more clouded with the publication of results from "second generation" studies using more recent data that are virtually the reverse of those first reported. That is to say, analyses of the 1988 and 1990 Displaced Worker Surveys report that that extended intervals of notice appear at best to be associated with minor reductions in joblessness but to lead to substantive earnings improvement[5; 7; 10; 11; 12].

   There is, then, a pressing need to inquire into mechanisms. The present paper is offered as a contribution to this line of investigation, focusing as it does on job changing in the aftermath of the displacement event. We investigate the correlates of job changing in the wake of displacement and the relationship between number of postdisplacement jobs and end-of-survey earnings, advance notice being a determinant of both turnover and earnings.

   To anticipate our results, we find evidence to suggest that formally notified workers, though they do not experience lower unemployment than their non-notified counterparts or have better overall reemployment prospects do appear to make better job matches and thereby enjoy higher relative earnings. This particular finding holds for written notice of more than two months' duration in equations estimated over a sample of all workers. Disaggregation of the data by reason of job loss suggests that this overall result masks potentially important differences among subgroups of the population either in their receptivity to the information conveyed by notice or because of the "quality" of notice provided.

2. Data and Estimation Procedure

   Our data are taken from the 1988 Displaced Worker Survey (DWS), conducted as a supplement to the January Current Population Survey of that year. Since the basic format of the 1988 survey closely resembles that of its 1984 and 1986 precursors, we confine our remarks here to that which is new in the third survey, to the jobs variable, and to the restrictions imposed on the data.

   The principal departure of the 1988 DWS from the earlier surveys is that it contains some indication of the extent of notice and not simply its incidence as heretofore. Thus, in addition to the composite or broadly defined notice question inquiring of workers whether they "expect[ed] a layoff or had received advance notice of a plant or business closing," the 1988 survey goes on to ask of those who replied in the affirmative whether they had received formal written notice and, if so, the length of notice provided. Weeks of notice are coded not in continuous form but rather in three grouped intervals: less than one month, between one and two months, and greater than two months. We may thus distinguish between what we shall term informal notice (INFONOT) and the three categories of written notice (WRITNOT1, WRITNOT2, WRITNOT3). INFONOT covers all those who responded to the composite notice question in the affirmative less those who subsequently indicated that they had received written notice.

   The second innovation in the 1988 survey is that it provides information on the duration of the single spell of joblessness immediately following the displacement event for those who subsequently located a job. In the previous surveys the reported length of unemployment could include multiple spells of joblessness, and hence reflect multiple job holding, if these were associated in the mind of the respondent with the displacement event. In other words, it is now possible to examine the causal link between postdisplacement search and job transitions. This possibility is precluded for the 1986 DWS (which was the first survey to include a number of jobs held variable) because of the contamination of the jobless duration measure by job turnover.

   Turning therefore to the number of jobs reported in the wake of displacement, the 1988 DWS identifies some six job holding categories, namely, 0 to 5 (or more) postdisplacement jobs. In what follows, we shall group jobs 3 to 5 within a single category. Unfortunately, there are signs of reporting/coding error in the responses to the job holding question. Thus, for example, it emerged that some workers who were classified as having 0 jobs since the displacement event could nevertheless be identified as employed on the basis of the January 1988 Current Population (CPS). To tackle this problem, it was decided also to use information from another question in the DWS that identified those who had claimed "never to have worked" since displacement, and which evinced a smaller reporting/coding error. A worker was duly classified as a 0 job holder if he or she claimed to be such in response to the number of jobs held question and replied in the affirmative to the relevant never found work question and was not otherwise reported as employed as of end-of-survey on the basis of the parent January 1988 CPS. Those respondents claiming at once never to have found work but yet reporting positive job holding were purged from the sample.

   Although we wish to account for the behavior of those currently economically active workers who never found work (and passed the consistency test in this regard), as a purely practical matter it was decided to exclude those bona fide positive job holders who were currently unemployed as of January 1988. This exclusion was imposed to avoid the problem of having to model, with inadequate data for the purpose, two types of selection into reemployment status, namely, that of workers who were continuously unemployed following displacement, on the one hand, and that of workers who, though they found work following displacement, subsequently lost or left their jobs, on the other.

   The remaining restrictions imposed on the data were as follows. Because the nature of displacement is not well defined for certain individuals and sectors, those employed part-time and in agriculture at the point of displacement were excluded, as were those who were aged above 65 years as of January 1988. Similar reasoning explains the exclusion of the self-employed together with those classified as displaced for "seasonal" or "other" reasons. Thus, our sample of displaced workers comprises those separated by reason of plant closing or relocation, slack work, and abolition of shift or position. Since there are grounds for believing that workers displaced by layoffs (i.e., the slack work and abolition of shift categories) may differ materially from their counterparts dislocated by reason of plant closings (all workers rather than a subset of...