That Job Layoff Might Really Be a Career Move

In what economists are calling a landmark study assessing the fate of laid-off workers in California, the Employment Development Department found that the majority of workers who lost their jobs in recent years were able to find work quickly, and typically at a higher wage.

Nearly 77% of 124,000 workers laid off in 1996-97 found new jobs within a year. And their average salary was 115.2% of what they previously earned, according to an early copy made available to The Times. It will be released later this month.

The report contrasts with what EDD Director Michael S. Bernick called “the conventional wisdom on displaced workers in California--that these workers are going from generally well-paid skilled jobs to lower-paid, lower-skilled service jobs.”

Though the ease of finding new, better-paid jobs was helped by a roaring economy, experts were startled by the high percentage of workers who found new jobs and the size of the wage gains. By comparison, raises for California workers averaged about 5% during the same time period, according to the U.S. Labor Department.

“This dramatically demonstrates the power of the California economy,” said Michael Dardia, an economist with the nonprofit Public Policy Institute of California.

Dardia coauthored a seminal study at Rand Corp. with Robert Schoeni in 1996, “Life After Cutbacks,” which tracked the work histories of thousands of laid-off aerospace and manufacturing workers in the early 1990s. The study found average wage losses of 17%.

Other studies, including those from other regions, have found that all types of workers typically average a wage loss of roughly 15% even two or three years after a layoff, Dardia said.

His analysis of the EDD study found that workers from some of the largest manufacturing industries--aerospace, electronics, apparel and food processing--fared the worst, finding jobs with average wages 11% below their previous salaries. But even that loss was less than expected.

“This paints a very positive picture of the flexibility of the California labor market,” said Lisa Grobar, director of the Cal State Long Beach Economic Forecast Project. “When people here get laid off they generally get back to work pretty quickly compared to other regions, especially places like Europe, where you can see long periods of unemployment.”

Dardia said the percentage of people getting rehired quickly was “huge” compared to prior studies. Dardia suspected that many of the 23% who did not find new jobs either left the state, retired, went to college, or became self-employed--a job category not captured by the data.

“What this shows is that people in the worst shape--those caught in a mass layoff--are doing fine,” Dardia said.

The study looked at almost 7% of workers filing for unemployment insurance benefits during a 12-month period starting in October 1996. It counted them as finding new jobs only if they returned to work in a position that was covered by unemployment insurance.

Compiled as a test run of a new computer program developed by employment officials in North Carolina, this was the first attempt by California labor market analysts to track the job histories of thousands of workers over a multiyear period. Economists said the use of similar tracking programs could provide a wealth of detail about the California economy that was previously difficult to obtain.

Dardia and other economists said they were impressed with the size and scope of the study.

Not surprisingly, the study found that men, whites and the highly educated had an easier time finding new jobs at higher salaries. Beyond that, it did not distinguish between blue-collar and white-collar workers, only between industries.

Using data from the study, Dardia went several steps further than the state employment officials in his analysis. He found that after adjusting for inflation and tossing out the motion-picture industry because of its erratic employment patterns, average wages rose 24% two years after a layoff in the nine largest industry categories in the study.

“That’s still a big number and it is pretty darn good for a wage two years after a layoff,” Dardia said. “It shows that displaced workers, even some of whom are not very highly skilled, still managed to find significant wage gains.”

Of the 10 largest categories in the study, bank employees suffered the biggest wage loss, earning only 81.6% of their previous salary one year after a layoff. Amusement and recreation workers also had trouble finding new jobs at their previous wages.

One reason, Grobar, the Cal State Long Beach economist said, is the long-term employment decline at banks caused by advances in technology and industry consolidation. Grobar suspects that many of the laid-off bank employees had to seek jobs in other industries where their skills were less valuable.

“Many times when you switch industries you lose ground,” Grobar said.

Motion-picture workers, agricultural workers and construction workers had the largest increases.

One reason for the increases in those categories is that the industries ratcheted up the number of hours they could offer employees as the economy improved, Grobar said.

Construction workers, for example, worked an average 37.4-hour work week in 1997 compared with 36.8 hours in the prior year.

Grobar said that although many people fear they will have trouble matching their previous wage once they are laid off, it’s not unusual for the opposite to happen, especially during a period of rapid employment growth.

“A lot of times many people seem to get their biggest raises when they change employers,” Grobar said.

Moreover, economists report a growing trend in the current economy where new employees often win larger salaries than long-term employees of the companies they are joining. That’s because companies must compete to hire new employees, and they are willing to shell out more money to fill a key opening.

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New Jobs, Better Pay

More than three-quarters of the 124,000 Californians laid off in 1996 and 1997 not only found new jobs quickly but also got an average raise of 15% by doing so, a state study found. A look at the pre- and post-layoff wages by industry category:

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Pre-layoff Post-layoff Industry wage wage Motion pictures $43,084 $61,443 Agricultural services 7,090 8,505 Business services 23,068 25,730 Crop production 8,876 10,956 Heavy construction 36,433 46,990 Depository institutions 20,807 16,979 Amusement/recreation services 32,300 29,385 Special trade contractors 28,871 36,718 Social services 15,074 16,064 Transit 13,985 15,579 All industries 27,808 32,033

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Source: Employment Development Department