Job Search of Older Unemployed Workers: Evidence from Longitudinal Data

Previous research has shown that older unemployed workers reduce their reservation wage at higher rates than their younger counterparts. However, we know little about why this is the case. In this paper, we focus on the psychological toll of joblessness for older workers as they experience long spells of unemployment. Using longitudinal data on unemployed workers in New Jersey, we first show that the negative emotions of older workers during unemployment intensify at a higher rate than younger workers as they remain unemployed. We then provide early evidence that older workers reduce their reservation wage at a higher rate, because remaining unemployed is psychologically more costly for older workers than their counterparts. We discuss the implications of our findings.