Penalized Labour Reinsertion: The Case of Peru

Going through unemployment or forced inactivity may be a shocking experience for any worker. However, negative consequences might not end with the finding of a new job. This paper shows that a new job implies, in most cases, lower real wages and fewer fringe benefits with respect to the previous job in Peru. The average earnings penalty ranges between 9 and 20 per cent in real terms, and female workers are most affected. Losses in fringe benefits might be even more harmful. Moreover, this paper finds that none of the Peruvian public mechanisms of social protection effectively helps to achieve a better labour reinsertion.