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Workers who lose their job face a variety of hardships while unemployed. But beyond the direct cost of job loss, its associated income loss, workers will tend to make less in their next job as well. This is perhaps not surprising intuitively and is certainly expected by economic theory. Coming from unemployment, a worker is not in a good position to select their optimal job nor to bargain for high wages once they find a job. In addition, unemployment may signal—rightfully or not—that a worker was separated for a reason and is less productive than their prior wage required. By either of these stories, unemployment duration should exacerbate the earnings losses. A worker unemployed longer will be more desperate to take a bad job that comes along and have an even worse bargaining position in it. Long unemployment durations also may signal failed attempts to find employment and be an even worse signal than a relatively short unemployment spell. A longer search time, however, may help the worker find a better match and a higher wage in re-employment. This article will explore empirically earnings losses across unemployment spells and show that, in general, the longer the unemployment duration, the larger the loss. 

The overall U.S. population is aging. As the top graph shows, the percent of the population between 16 and 64 years of age (generally considered working age) has been declining since about 2007. At the same time, the percent of the population 65 years and older has been increasing. . . As the working age population shrinks relative to the total, the dependency burden (the ratio of dependent young and old to those of working age) increases.

In sum, men and women of all ages experienced a rise in LTU after the Great Recession. In this essay, we document the lesser-known fact that LTU affected older women more strongly. This group experienced a remarkable change: from a low pre-recession LTU-to-unemployment ratio of 14 percent to a post-recession rate of 50 percent.