Firm Performance and the Volatility of Worker Earnings

50 Pages Posted: 30 Jan 2017 Last revised: 17 Aug 2022

See all articles by Chinhui Juhn

Chinhui Juhn

University of Houston - Department of Economics; IZA Institute of Labor Economics

Kristin McCue

Government of the United States of America - Bureau of the Census

Holly Monti

affiliation not provided to SSRN

Brooks Pierce

Bureau of Labor Statistics

Date Written: January 2017

Abstract

Using linked employer-employee data for the U.S., 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 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.

Suggested Citation

Juhn, Chinhui and McCue, Kristin and Monti, Holly and Pierce, Brooks, Firm Performance and the Volatility of Worker Earnings (January 2017). NBER Working Paper No. w23102, Available at SSRN: https://ssrn.com/abstract=2907905

Chinhui Juhn (Contact Author)

University of Houston - Department of Economics ( email )

Houston, TX 77204-5882
United States
713-743-3823 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Kristin McCue

Government of the United States of America - Bureau of the Census ( email )

4600 Silver Hill Road
Washington, DC 20233
United States

Holly Monti

affiliation not provided to SSRN

No Address Available

Brooks Pierce

Bureau of Labor Statistics ( email )

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