Proximity to parents after a job loss is correlated with future earnings, according to a Cleveland Fed study
The study finds post-job-loss earnings recovery is faster for young adults who live near their parents than for young adults who live farther away.
Federal Reserve Bank of Cleveland researcher Pawel Krolikowski and his co-authors compare the post-job-loss earnings of adults who live near their parents (within the same Census tract or commuting zone) at the time they lose their jobs to the earnings of those whose parents don’t live nearby. They find that young adults (ages 25 to 35) who live near their parents earn roughly the same amount five years after a job loss as a control group of people who did not lose their jobs. In contrast, those living farther from their parents experience a large decline in earnings that persists 10 years after the job loss.
For older adults (ages 36–55), the researchers see no difference in post–displacement earnings outcomesbetween people who live close to their parents and those who live far away from their parents. “This maybe because some older adults live close to their parents in order to take care of them,” say theresearchers.
Krolikowski and his co–authors caution that the statistical correlation between young adults’ proximity totheir parents and future earnings does not demonstrate causality. They note that it is possible that otherfactors correlated with living in the same neighborhood as one’s parents may explain the differentialimpact of displacement on earnings. Nevertheless, the researchers say the findings suggest that parentsmay play an important role in adult children’s labor market outcomes. “Understanding the impact of familyconnections might help to explain people’s reluctance to relocate for new jobs, for example, and couldinform governmental assistance programs after job losses,” says Krolikowski.
Federal Reserve Bank of Cleveland
The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.
The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.
Doug Campbell, firstname.lastname@example.org, 513.455.4479