Labor markets have undergone considerable change in recent years. Manufacturing positions are shrinking, especially in blue-collar occupations, and real wages for workers with little education are declining. A rising share of unemployment is accounted for by workers who have been permanently laid off.
This article uses data on workers displaced from Massachusetts companies in the early 1990s who sought government-provided reemployment assistance to examine, first, their duration of unemployment and then, for those who found work, their new wages and other job attributes. The evidence shows that workers from declining industries suffer especially sharp wage cuts, and former defense workers have the most severe adjustment costs of all. The research also shows that early sign-up for adjustment services tends to reduce the duration of joblessness. However, laid-off workers who participate in education and training programs do not necessarily find better jobs than those who avail themselves only of more basic forms of assistance.