The experience of losing a job in different countries in Europe

This paper documents the consequences of losing a job across countries using administrative datasets from various European countries and the same empirical methodologies throughout the analysis.

The paper shows that workers from Northern countries, such as Denmark and Sweden, experience the lowest earnings declines following job displacement, while workers in Southern countries, such as Portugal, Italy, and Spain experience losses three times as high. French and Austrian workers face earnings losses somewhere in-between (see Figure 1).

Key to these differences is that Southern European workers are less likely to find employment following displacement. The loss of high-quality jobs for workers is particularly important: the premium in compensation associated to the specific firm, and not to the specific workers’ skills, accounts for 40% to 95% of within country earnings declines.

An analysis of labor market institutions across countries shows that the use of active labor market policies predicts a significant portion of the cross-country heterogeneity in earnings losses. As a matter of fact, Northern countries have greater relative expenditures on re-employment and re-training policies, whereas once again southern countries have markedly lower expenditures in those same activation policies. In this context Portugal stands out as one of the worst performing labor markets when it comes to re-employment: five years after displacement one in five workers has not found a new job (see Figure 2), and the average displaced worker has total earnings 25% lower than before the firing.

Click here to go to the paper by Antoine Bertheau, Edoardo Maria Acabbi, Cristina Barcelo, Andreas Gulyas, Stefano Lombardi, and Raffaele Saggio.