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Moving back home after losing your job may not be the most appealing situation, but it may be the smartest thing a laid-off worker can do, a study suggests. The research shows that moving home presents laid-off workers with both short- and long-term financial benefits by allowing them to search freely for a new job while saving money.
"Intuitively, it makes sense that people move home after an employment shock," said Greg Kaplan, an economics professor at the University of Pennsylvania who is the study's author. "We've seen a lot of anecdotal evidence of this during the latest recession. But there hadn't been much hard data on how common it is or what the effects might be. This study demonstrates that the option to move home is potentially very important."
Kaplan based his study on data for nearly 1,500 men in their late 20s and early 30s. He found that the worker who had lost a job at age 20 and continued to live on his own while searching for new work was making 25 percent less money by age 26 than the one who had never lost his job. However, the worker who lost his job and moved home was, by age 26, essentially making the same money as his always-employed counterpart.
According to Kaplan, moving home allowed workers who had lost their jobs to set themselves up to get a better job later on. This is because those living at home did not need money immediately, so they did not have to rush into a job with low future-earning potential.
"Jobs with higher growth potential may be harder to find," Kaplan said, "and they often involve low earnings in the short run but higher earnings in the future—an internship, for example. If you're living at home, you might be able to wait for these better opportunities."
The findings were part of the paper "Moving Back Home: Insurance against Labor Market Risk" published in the June edition of the Journal of Political Economy.