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Firm Performance and the Volatility of Worker Earnings

In: Firms and the Distribution of Income: The Roles of Productivity and Luck

Author

Listed:
  • Chinhui Juhn
  • Kristin McCue
  • Holly Monti
  • Brooks Pierce

Abstract

Using linked employer-employee data for the United States, we examine whether shocks to firm revenues are transmitted to the earnings of continuing employees. While full insurance is rejected, the elasticity of worker earnings with respect to persistent shocks in firm revenues is small and consistent with the notion that firms insulate workers from idiosyncratic shocks. Exploring the heterogeneity of effects, we find the largest elasticity in professional services among employees in the top 5% of their employers' earnings distribution, suggesting that in certain jobs performance pay may be a countervailing force to wage insurance.
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Suggested Citation

  • Chinhui Juhn & Kristin McCue & Holly Monti & Brooks Pierce, 2015. "Firm Performance and the Volatility of Worker Earnings," NBER Chapters, in: Firms and the Distribution of Income: The Roles of Productivity and Luck, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:13718
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    2. Lucifora, Claudio & Origo, Federica, 2025. "Rigid Yet Resilient: Firms' Margins of Adjustment to Demand Shocks in Regulated Labour Markets," IZA Discussion Papers 17670, Institute of Labor Economics (IZA).
    3. Adamopoulou, Effrosyni & Manaresi, Francesco & Rachedi, Omar & Yurdagul, Emircan, 2021. "Minimum Wages and Insurance within the Firm," IZA Discussion Papers 14943, Institute of Labor Economics (IZA).
    4. Michael W. L. Elsby & Gary Solon, 2019. "How Prevalent Is Downward Rigidity in Nominal Wages? International Evidence from Payroll Records and Pay Slips," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 185-201, Summer.
    5. Lucifora, Claudio & Origo, Federica, 2025. "Rigid yet resilient: Firms’ margins of adjustment to demand shocks in regulated labour markets," Labour Economics, Elsevier, vol. 94(C).
    6. Reizer, Balázs, 2022. "Employment and Wage Consequences of Flexible Wage Components," Labour Economics, Elsevier, vol. 78(C).
    7. Lachowska, Marta & Mas, Alexandre & Woodbury, Stephen A., 2022. "How reliable are administrative reports of paid work hours?," Labour Economics, Elsevier, vol. 75(C).
    8. Benjamin Friedrich & Costas Meghir & Lisa Laun & Luigi Pistaferri, 2018. "Earnings Dynamics and Firm-Level Shocks," 2018 Meeting Papers 536, Society for Economic Dynamics.
    9. Maksym Odnorog & Nataliia Kraus & Kateryna Kraus, 2019. "The Features Of Entrepreneurial Interactions In The Agricultural Sector In Terms Of Institutional Transformations," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 5(4).
    10. Yamashita, Nobuaki, 2025. "Sharing economic rents with workers? Evidence from matched employer-employee data in Vietnam," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 47(3), pages 115-128.
    11. Wenjing Duan & Pedro S. Martins, 2022. "Rent sharing in China: Magnitude, heterogeneity and drivers," British Journal of Industrial Relations, London School of Economics, vol. 60(1), pages 176-219, March.
    12. Kerndler, Martin, 2019. "Size and persistence matter: Wage and employment insurance at the micro level," ECON WPS - Working Papers in Economic Theory and Policy 04/2019, TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit.
    13. Mons Chan & Ming Xu & Sergio Salgado, 2019. "Heterogeneous Passthrough from TFP to Wages," 2019 Meeting Papers 1447, Society for Economic Dynamics.
    14. Christine Blandhol & Magne Mogstad & Peter Nilsson & Ola Lotherington Vestad & J. Peter Nilsson, 2020. "Do Employees Benefit from Worker Representation on Corporate Boards?," CESifo Working Paper Series 8794, CESifo.
    15. Bagger, Jesper & Fontaine, Francois & Galenianos, Manolis & Trapeznikova, Ija, 2025. "Output Fluctuations and Firm Recruitment Effort," IZA Discussion Papers 18068, Institute of Labor Economics (IZA).
    16. Nobuaki Yamashita & Doan Thi Thanh Ha, 2022. "Participation in Global Value Chains and Rent Sharing by Small Firms in Viet Nam," Working Papers DP-2021-52, Economic Research Institute for ASEAN and East Asia (ERIA).
    17. ED deHAAN & NAN LI & FRANK S. ZHOU, 2023. "Financial Reporting and Employee Job Search," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 61(2), pages 571-617, May.
    18. Maibom, Jonas & Vejlin, Rune Majlund, 2021. "Passthrough of Firm Performance to Income and Employment Stability," IZA Discussion Papers 14131, Institute of Labor Economics (IZA).
    19. Allan, Corey & Maré, David C., 2022. "Who Benefits from Firm Success? Heterogenous Rent Sharing in New Zealand," IZA Discussion Papers 15264, Institute of Labor Economics (IZA).
    20. Vladimir Nusinov & Ievgeniia Mishchuk & Yaroslav Izmaylov, 2019. "Development Of The Stereometric Method To The Analysis Of Economic Categories And Processes And Its Application In Security And Taxation," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 5(4).
    21. Fukao, Kyoji & Perugini, Cristiano & Pompei, Fabrizio, 2022. "Labour market regimes, technology and rent-sharing in Japan," Economic Modelling, Elsevier, vol. 112(C).
    22. Yannick Bormans & Angelos Theodorakopoulos, 2023. "Productivity dispersion, wage dispersion and superstar firms," Economica, London School of Economics and Political Science, vol. 90(360), pages 1145-1172, October.

    More about this item

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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