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Understanding Earnings Instability: How Important are Employment Fluctuations and Job Changes?

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  • Sule Celik
  • Chinhui Juhn
  • Kristin McCue
  • Jesse Thompson

Abstract

Using three panel datasets (the matched CPS, the SIPP, and the newly available Longitudinal Employment and Household Dynamics (LEHD) data), we examine trends in male earnings instability in recent decades. In contrast to several papers that find a recent upward trend in earnings instability using the PSID data, we find that earnings instability has been remarkably stable in the 1990s and the 2000s. We find that job changing rates remained relatively constant casting doubt on the importance of labor market “churning.” We find some evidence that earnings instability increased among job stayers which lends credence to the view that greater reliance on incentive pay increased instability of worker pay. We also find an offsetting decrease in earnings instability among job changers due largely to declining unemployment associated with job changes. One caveat to our findings is that we focus on men who have positive earnings in two adjacent years and thus ignore men who exit the labor force or re-enter after an extended period. Preliminary investigation suggests that ignoring these transitions understates the rise in earnings instability over the past two decades.

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File URL: ftp://ftp2.census.gov/ces/wp/2009/CES-WP-09-20.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 09-20.

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Length: 37 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:cen:wpaper:09-20

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Cited by:
  1. Cappellari, Lorenzo & Leonardi, Marco, 2007. "Earnings instability and tenure," ISER Working Paper Series 2007-04, Institute for Social and Economic Research.
  2. Donggyun Shin & Gary Solon, 2008. "Trends in Men's Earnings Volatility: What Does the Panel Study of Income Dynamics Show?," NBER Working Papers 14075, National Bureau of Economic Research, Inc.
  3. Ziliak, James P. & Hardy, Bradley & Bollinger, Christopher, 2011. "Earnings volatility in America: Evidence from matched CPS," Labour Economics, Elsevier, Elsevier, vol. 18(6), pages 742-754.

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