CONTACT:
Harriet K. Goodheart, Director, Temple University News Bureau
[email protected]
Telephone:215-204-7476
TEMPLE PROFESSOR LOOKS AT EFFECTS OF JOB DISPLACEMENT ON SUBSEQUENT EARNINGS OF MANAGERS AND PROFESSIONALS
When downsizing detours managers and professionals off their career track, they may have a hard time accelerating to their pre-displacement income level when they get re-employed, according to a professor at Temple UniversityÃs School of Business and Management.
Using data from the U.S. Census BureauÃs survey of displaced workers, Thomas N. Daymont, professor of human resource management at Temple, and colleague Wayne A. Morra of Beaver College, analyzed the earnings losses due to job displacement of highly skilled white collar workers and to what extent their new earnings replaced those of their previous job.
What they found was that for the most part, they didnÃt:
On average, managers and professionals re-employed after losing their job earned just 85 percent of their expected non-displacement income, had they stayed in their previous position.
That average, Daymont points out, obscures a wide range of earnings outcomes that includes some managers who fared well financially and others who suffered substantial losses in subsequent positions:
--More than one-quarter actually earned more at their new job than their anticipated earnings if they had not been displaced;
--More than one-quarter earned less than two-thirds of their anticipated non-displacement earnings;
--Older workers suffered substantially greater losses: managers in their late fifties experienced a salary replacement rate of just 65 percent of prior earnings--20 percent lower than the average.
--Women--who generally start at a lower rung on the earnings ladder-- suffered larger losses in replacement earnings than men.
--Subsequent to re-employment, displaced workers saw their earnings increase at a decreasing rate.
During the 1980s blue collar workers were more than twice as likely to lose their job. But Daymont points out that in the ëlean and meanà economy of the 1990s, white collar managers and professionals are equally vulnerable to layoffs.
ìThe economyÃs growing, but weÃre seeing little decline in job displacement,î he said. ìEven when theyÃre doing well, many companies continue to lay off workers as a means of maintaining costs and staying competitive.
ìThe stock market tends to reward companies that lay people off--some view it as a positive way to increase the value of a stock.î
In their study, Daymont and Morra looked at a large sampling of professionals and managers displaced between 1987 and 1991. Their results, the researchers say, actually understate the total losses people experience. The study does not take into account income lost during the time of unemployment, and 20 percent of the sample was not yet re-employed at the time of the survey.
For displaced mid-career managers and professionals, there are no easy answers, according to Daymont.
ìThere is some evidence that outplacement services help reduce the extent of lost income,î he says. ìWe may need to find ways to encourage companies to provide more substantial severance packages and job search assistance to offset the losses associated with economically re-allocating the workforce as they strive to remain competitive in an era of new technology.
ìThe only real form of job security is the ability to get another job.î
Daymont and Morra presented their findings at the Eastern Economic Association meetings earlier this year.
For more information or to interview Professor Daymont, call TempleÃs News Bureau, 215-204-7476.
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hkg-114 August 27, 1997
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