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Economic Perspectives, Vol. 29, 2nd, No. 2, May 2005
What do we know about job loss in the United States? Evidence from the Displaced Workers Survey, 1984–2004
A defining characteristic of the U.S. labor market is its fluid nature. Half of all new jobs (worker/employer matches) end in the first year and, at any point in time, about 20 percent of workers have been with their current employer for less than one year (Farber, 1999a).1 This fluidity allows rapid reallocation of workers across sectors in response to demand shifts, and the relatively small direct costs to employers of laying off workers encourages hiring in the face of uncertain future demand. Rates of employment growth in the U.S. have dwarfed those in Western Europe in no small measure because of the relatively small costs to firms of shedding workers in the U.S. compared with their counterparts in the European Union. However, this flexibility can impose substantial costs on the workers who lose jobs.
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