Picture of hand signing bills and counting money
Category: Discovery & Impact, Research

Title: The role of debt in job displacement: the worker’s perspective

“Our findings emphasize the importance of the credit moratoriums we’re seeing right now, especially during the pandemic.”

– Dr. Andreas Kern

“In the short term, we will see that credit moratoriums drive unemployment upwards as households see relief from the pressure to service their debt,” says Dr. Kern. “It might explain why we’re seeing wage increases and a sluggish recovery in parts of the US labor market. At the same time, it’s actually shielding people from making really bad decisions concerning their career and income trajectories in the future.”

This idea reinforces the need for government programs to pause mortgage and student loan payments for people who have recently been displaced or lost their jobs. Dr. Kern acknowledges that “people can sit out the labor market when they don’t have to service their debt,” but stipulates that “policymakers will have to think about how to re-calibrate stimulus policies to account for these dynamics.”

Dr. Robert Bednarzik, recently retired, was an associate teaching professor in the McCourt School of Public Policy for nearly 30 years, following a very successful career in the US Department of Labor studying the impact of international phenomenon on US workers’ employment and wages.

Dr. John Hisnanick is an adjunct professor in the McCourt School. His research interests include marriage equality and the role of household debt, wealth and income in returning to work for displaced workers in the period following the Great Recession.

Dr. Andreas Kern is an associate teaching professor in the McCourt School. His research focuses on the political economy of macroeconomic and financial governance, with a special focus on central banks, credit market dynamics and financial crises.