Is migration a solution to the earnings loss of the displaced workers in the segmented labor market in the U.S.?

Earnings loss due to both lower wages at the current job and the time forgone between two jobs is one of the major consequences of job displacement caused by plant closing, moving and downsizing in the 1980s. Is migration a solution? The present study attempts to answer this question empirically by exploring five waves of data on the displaced manufacturing workers from the CPS Displaced Workers Supplements.

Human capital theory and neo-classica1 theory of labor migration both assert that migration should improve people's socio-economic status. They largely neglect social and economic structural constraints on the outcomes of individual behavior. From the dynamic segmentation perspective, this study hypothesizes that deindustrialization has been squeezing workers from the subordinate (lower-tier) primary segment down and thus such workers suffered more loss than their counterparts from the independent (upper-tier) segment; since deindustrialization primarily affected the core manufacturing industries, core workers suffered greater loss from displacement relative to their peripheral counterparts. In this context, this study further hypothesizes that migration will not benefit the workers from the subordinate primary segment as much as the workers from the independent primary segments.

The empirical results confirm the main hypotheses of the present study: Workers displaced from the subordinate primary segment suffered more earnings loss and longer jobless duration than their counterparts from the independent primary segment. Workers from the core industries experienced longer jobless duration than their counterparts from the peripheral segment. Migration had no effect on the postdisplacement earnings and jobless duration for the displaced workers from either segment. The clear implication of these findings is that migration is no solution.

Among other things, occupation/industry change when reemployed is an important factor causing earnings loss; formal educational attainment reduces earnings loss and shortens the jobless duration while work tenure on the pre-displacement job increases earnings loss and lengthens the jobless duration.