Financial Crisis 2007: Employees Still Earning Less Today
Research
04.03.2024
The financial crisis of 2007/2008 is still having a negative impact on employees' income today
The lingering effects of the global financial crisis of 2007 and 2008 are still felt today. A study from ZEW Mannheim reveals that higher-earning office employees of capital-intensive firms in particular continue to be significantly affected by the crisis. Even in 2018, earnings losses of up to 15 per cent were still measurable. The financial crisis has thus had a lasting impact on the entire working life. The results, based on data from Italy, are transferrable to other European countries.
“The financial crisis has altered many career paths, severely impacting the personal lives of many individuals. Our study quantifies the long-term consequences of the financial crisis, with high earners being particularly affected,” explains Effrosyni Adamopoulou, PhD, co-author of the study and researcher in ZEW’s “Inequality and Social Policy” Group.
High-earning employees particularly affected
Due to the credit crunch, firms reduced their investments, resulting in fewer positions for skilled professionals during the financial crisis. After losing their jobs and often after temporary or even permanent unemployment, those affected earned significantly less. On average, dismissed skilled professionals from capital-intensive firms experienced the highest losses at minus 15 per cent. In contrast, low-skilled workers in labour-intensive firms were much less likely to lose their jobs. “The earnings losses following a job change during the financial crisis cannot be recouped throughout a person’s entire career. They have lasting effects on the rest of their working life, which may eventually also impact the pension amount of the affected employees,” explains Adamopoulou.
Results applicable to other European countries
The study examines how the global financial crisis of 2007 and 2008 still affects employees and firms today. It compares both employees who were able to retain their jobs or had to change during the crisis, as well as capital- and labour-intensive firms. The calculations are based on representative data for Italy from 2006 to 2018. The researchers analysed data from the Italian National Institute of Social Welfare (INPS), the Italian Credit Register (CR), the data provider Cerved, as well as Supervisory reports.
