Out of the frying pan into the fire: displaced workers’ vocational skill specificity, self-employment, and income

Drawing on vocational specificity and push-based entrepreneurship literature, we ask whether the degree of vocational specificity is linked to the likelihood of displaced workers transitioning into self-employment, whether such transitions correlate with greater earnings declines, and whether self-employment in an industry distant from their pre-displacement industry exacerbates earnings declines. Based on the biennial Current Population Survey-Displaced Worker Supplements (CPS-DWSs) from 1986 to 2020, higher vocational specificity in the pre-displacement occupation is positively associated with odds of switching to self-employment. However, engagement in self-employment is associated with higher earnings losses, that further exacerbate when transitioning to industries more distant from the pre-displacement industry. The findings have implications for policymakers and researchers.