Journal of Labor Economics Vol. 36 No. S1 2018

Firm Performance and the Volatility of Worker Earnings

Chinhui Juhn^1,2; Kristin McCue³; Holly Monti⁴; Brooks Pierce⁵

¹ National Bureau of Economic Research · ² University of Houston · ³ United States Census Bureau · ⁴ Foundation for Agronomic Research · ⁵ Bureau of Labor Statistics

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.

DOI

10.1086/694167

Volume

36

Issue

S1

Pages

S99-S131

Language

en

Sources

openalex crossref

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