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Key to a Stable Income? Living Near Your Parents

by Katie Moritz
February 27, 2017 | Money

No matter what, losing your job is a humongous setback, both emotionally and career-wise. But if you stuck around your hometown and find yourself without a job, you have a big advantage over those who moved away, according to data from the Federal Reserve Bank.

The Federal Reserve Bank of Cleveland looked at 20 years of career data for about 35,000 workers ages 25 to 35, which included about 1,350 layoffs. When they studied these workers, the research economists found young adults who experience job loss continue to make less money than their not-laid-off counterparts even 10 years after the fact. On average, young adults who lost their jobs experienced an earnings decrease of about 30 percent, $10,000 for adults living near their parents and $15,000 for those living farther away.

Stable Income
"Not displaced" means workers who have not lost their jobs. "Displaced" means workers who have lost their jobs. Year zero represents the year the worker experienced the layoff.

But the earnings of those who lived in the same neighborhood as their parents when they were laid off bounced back much more quickly. Though they statistically made less money than workers who lived farther away from their parents,  the ones who lived nearby were able to recover from the job loss within five years. At that point, their earnings matched up with workers who lived near their parents and hadn't experienced a layoff.

After 10 years, workers who lived farther away from their parents were still making 30 percent less than their counterparts who had not been laid off.

"This means that displaced workers who don’t live near their parents shoulder all the burden of the long-run negative effects... on earnings," the researchers wrote.

Stable Income
This graph compares laid-off ("displaced") workers to ones who have not experienced a layoff based on how close they live to their parents. Year zero is the year the layoff occurred.

Why is having parents nearby so helpful?

About 30 percent of young adults live in the same neighborhood as their parents, the data showed. Those workers have better access to support from their parents in the form of housing, food and childcare. That kind of help can take some of the financial pressure off of an unemployed person and allow them to search for a job more aggressively, the researchers wrote.

When they're nearby, parents can more easily help their kids find new jobs through their own social networks. They're also on hand to provide emotional support and encouragement that could help a laid-off adult child bounce back emotionally from the blow of losing a job. The farther away laid-off workers lived from their parents, the less quickly their earnings bounced back from the job loss, the data showed. And the trend didn't apply to adult children over the age of 35.

The most financially successful group were the workers who lived far away from their parents and had not lost their jobs. (They also tended to be younger and more educated than people who stayed near home.) The data showed that, on average, people who lose their jobs never catch up earnings-wise to those who never experience a layoff.

So, whether you're a hometown lifer or couldn't wait to get the heck out of there, there are perks to your situation.

Katie Moritz
Katie Moritz was Rewire's senior editor from 2016-2019. She is a Pisces who enjoys thrift stores and pho. Follow her on Twitter @katecmoritz.
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