Reconciling Trends in U.S. Male Earnings Volatility: Results from Survey and Administrative Data

Abstract

There is a large literature on earnings and income volatility in labor economics, household finance, and macroeconomics. One strand of that literature has studied whether individual earnings volatility has risen or fallen in the U.S. over the last several decades. There are strong disagreements in the empirical literature on this important question, with some studies showing upward trends, some showing downward trends, and some showing no trends. Some studies have suggested that the differences are the result of using flawed survey data instead of more accurate administrative data. This paper summarizes the results of a project attempting to reconcile these findings with four different data sets and six different data series--three survey and three administrative data series, including two which match survey respondent data to their administrative data. Using common specifications, measures of volatility, and other treatments of the data, four of the six data series show a lack of any significant long-term trend in male earnings volatility over the last 20-to-30+ years when differences across the data sets are properly accounted for. A fifth data series (the PSID) shows a positive net trend but small in magnitude. A sixth, administrative, data set, available only since 1998, shows no net trend 1998-2011 and only a small decline thereafter. Many of the remaining differences across data series can be explained by differences in their cross-sectional distribution of earnings, particularly differences in the size of the lower tail. We conclude that the data sets we have analyzed, which include many of the most important available, show little evidence of any significant trend in male earnings volatility since the mid-1980s.

Keywords: administrative data, earnings, volatility

JEL Classification: J3