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Earnings Instability

Author

Listed:
  • Peter Ganong
  • Pascal J. Noel
  • Christina Patterson
  • Joseph S. Vavra
  • Alexander Weinberg

Abstract

This paper uses high-frequency administrative data to show that the majority of U.S. workers experience substantial month-to-month fluctuations in pay, even within ongoing employment relationships. This earnings instability is pervasive, but it has been masked in past analysis of annual data. Moreover, this instability is unequally distributed: lower-income, hourly workers face more instability than higher-income, salaried workers. This is because earnings instability arises in large part from firm-driven fluctuations in hours. This earnings instability is a meaningful source of economic risk: we provide causal evidence that it increases consumption volatility and also leads to greater job separations, and we find that workers have a high willingness to pay to reduce earnings instability. These findings suggest that short-term earnings risk is a significant and previously underappreciated feature of the labor market.

Suggested Citation

  • Peter Ganong & Pascal J. Noel & Christina Patterson & Joseph S. Vavra & Alexander Weinberg, 2025. "Earnings Instability," NBER Working Papers 34227, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34227
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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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