Firm Performance and the Volatility of Worker Earnings
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.
You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.
Document Object Identifier (DOI): 10.3386/w23102
Forthcoming: Firm Performance and the Volatility of Worker Earnings, Chinhui Juhn, Kristin McCue, Holly Monti, Brooks Pierce. in Firms and the Distribution of Income: The Roles of Productivity and Luck, Lazear and Shaw. 2016