Phoenix rising from broken desk symbolizes career renewal through retraining.

Laid Off? Level Up: How Retraining Can Boost Your Earnings and Career Prospects

Lena Voss in Business & Economy June 2025 • 4 min read.

"New research reveals the surprising benefits of post-unemployment education, especially for those switching industries."

In an era defined by rapid technological advancements and shifting economic landscapes, the specter of unemployment looms large for many, especially those in industries undergoing significant transformation. The U.S. labor market, increasingly polarized between high- and low-skilled jobs, leaves those with moderate skills vulnerable to displacement. This trend, amplified by economic downturns, necessitates a proactive approach to career resilience and adaptability.

For decades, economists and policymakers have championed education as a means of mitigating the adverse effects of job loss. Skill acquisition through further education is not merely a theoretical concept; it's a practical strategy advocated across the political spectrum. The Great Recession underscored this need, prompting initiatives that encouraged unemployed individuals to pursue reskilling opportunities at community colleges and other institutions.

While government-sponsored training programs have traditionally been the focus of research, a significant portion of unemployed workers pursue further education independently. To shed light on this less-studied avenue for skill enhancement, researchers have turned to comprehensive administrative data, linking unemployment insurance claims with educational records to estimate the impact of retraining on earnings and career trajectories.

The Upside of Upskilling: Retraining and Earnings Gains

Phoenix rising from broken desk symbolizes career renewal through retraining.

A groundbreaking study using high-quality administrative data from Ohio, tracking the post-layoff education pursuits of unemployed workers, reveals compelling evidence of the benefits of retraining. By employing rigorous matching methods, researchers compared the labor market outcomes of those who enrolled in postsecondary institutions with those who did not, effectively isolating the impact of further education on their earning potential.

The findings challenge conventional wisdom, highlighting that enrollees experienced an average earnings gain of six percent in the third and fourth years after enrolling. This boost comes after a period of depressed earnings during the first two years, often attributed to the 'lock-in' effect of being in school. This positive trajectory suggests that retraining is not merely a short-term fix but a strategic investment in long-term career growth.

Industry Switchers See Bigger Gains: Workers who transitioned to new industries, especially healthcare, experienced the most significant earnings boost.
Lock-in Effect: Enrollees initially face depressed earnings while in school.
Long-Term Impact: The positive effects persist and can widen over a ten-year horizon.

Further analysis of the data suggests that retraining primarily affects earnings at the extensive margin, meaning it increases employment rates more than wage rates. By examining the courses taken and credentials received by enrollees, the study pinpoints industry-switchers, particularly those entering the healthcare sector, as key drivers of these positive outcomes. These insights underscore the potential of retraining to facilitate career transitions and open doors to new opportunities.

Seizing Opportunity Amidst Uncertainty

These findings provide a compelling case for unemployed workers to consider further education as a viable path toward career recovery and advancement. The study's insights into the types of training that yield the most significant returns offer valuable guidance for individuals and policymakers alike. As the labor market continues to evolve, the ability to adapt and acquire new skills will be paramount, making retraining a powerful tool for navigating the challenges of unemployment and securing a brighter economic future.

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Everything You Need To Know

What are the primary benefits of retraining after a layoff?

Retraining, especially through community colleges, can lead to significant earnings gains and career transformation. A study using administrative data from Ohio found that enrollees experienced an average earnings gain of six percent in the third and fourth years after enrolling. Workers transitioning to new industries, particularly healthcare, experienced the most significant earnings boost. These gains highlight retraining as a strategic investment in long-term career growth, facilitating career transitions and opening doors to new opportunities.

How does the 'lock-in' effect impact earnings after retraining?

The 'lock-in' effect refers to the initial period of depressed earnings that enrollees face while they are in school for retraining. This is because individuals are dedicating their time to education rather than working. However, this is a short-term trade-off. The positive trajectory of earnings suggests that retraining is not merely a short-term fix, but a strategic investment in long-term career growth. The study highlights that the gains are seen in the third and fourth years after enrolling.

Why is industry switching important after retraining?

Industry switchers, especially those entering the healthcare sector, experienced the most significant earnings boost. Retraining primarily affects earnings at the extensive margin, increasing employment rates more than wage rates. By examining the courses taken and credentials received, the study pinpoints industry-switchers as key drivers of positive outcomes, as retraining facilitates career transitions and opens doors to new opportunities. The findings underscore the importance of adapting to evolving labor market demands.

What specific data was used to analyze the impact of retraining?

The groundbreaking study used high-quality administrative data from Ohio. It linked unemployment insurance claims with educational records, tracking the post-layoff education pursuits of unemployed workers. Researchers compared the labor market outcomes of those who enrolled in postsecondary institutions with those who did not, using rigorous matching methods to isolate the impact of further education on their earning potential. This data-driven approach provided compelling evidence of the benefits of retraining.

How can the findings on retraining be applied to navigate unemployment and build a more secure career?

The findings provide a compelling case for unemployed workers to consider further education as a viable path toward career recovery and advancement. The study's insights into the types of training that yield the most significant returns offer valuable guidance for individuals. As the labor market continues to evolve, the ability to adapt and acquire new skills will be paramount, making retraining a powerful tool for navigating the challenges of unemployment and securing a brighter economic future. Specifically, transitioning to industries like healthcare can provide notable earnings boosts.