Key Findings Details
What Do Data on Millions of U.S. Workers Say About Life Cycle Income Risk?
Fatih Guvenen, Fatih Karahan, Serdar Ozkan and Jae Song
- We examine the earnings histories of over 5 million individuals using confidential Social Security Administration data and find that earnings risk varies significantly across the population.
- Income risk decreases between ages 25 to 50 and then increases again.
- As individuals get older, they are more likely to experience very small and very large earnings shocks rather than moderate shocks.
- With age, a large drop in earnings becomes more likely than a large increase.
- Earnings growth varies greatly by lifetime income. Between ages 25 to 55, individuals with earnings in the top 5% experience growth 10 times larger than those with average lifetime earnings.
- Earnings changes over the life cycle do not have a normal distribution.