Till von Wachter, Jae Song and Joyce Manchester show that unemployment’s negative effect on your pocketbook persists long after re-employment. The figure below shows what happened to the incomes of people who did and did not lose their job during the 1982 recession. It shows that those that lost their jobs (the grey line) saw a decrease in earnings that has yet to recover. Controlling for inflation, on average the unemployed make less now than they did before they lost their jobs 20 years ago.
…the net loss to a displaced worker with six years of job tenure is approximately $164,000, which exceeds 20 percent of the average lifetime earnings of these workers. These future earnings losses dwarf the losses associated from the period of unemployment itself.
This same pattern can be found at the society level. Michael Greenstone and Adam Looney made the same comparison across countries that were hit the hardest by the recession (purple line) and countries hit less hard (green line). The incomes of individuals in the hardest hit nations were harmed long-term:
Greenstone and Looney show the same pattern for the unemployment rate: