Recent Trends in the Variability of
Individual Earnings and
Household Income
June 2008
Individual earnings and household income were indexed to 2006 dollars using the research series of the consumer price index for all urban consumers.
Numbers in the text and tables may not add up to totals because of rounding.
Preface
Changes in earnings and income are characteristic of a dynamic labor market, as people change jobs or careers, move between part-time and full-time work, or start or stop working. Having that flexibility in the labor market is generally considered a source of strength of the U.S. economy overall. Nonetheless, that variability causes true economic hardship for some people.
This Congressional Budget Office (CBO) paper, prepared at the request of Senator Charles E. Schumer and Senator Jim Webb, uses administrative and survey data to examine year-to-year changes in individual earnings and household income since 1984. It also examines variability in earnings and income by factors such as age, sex, and education. In keeping with CBO’s mandate to provide objective, impartial analysis, the paper makes no recommendations.
Molly Dahl and Jonathan A. Schwabish of CBO’s Health and Human Resources Division, and Thomas DeLeire, formerly of CBO, prepared the paper under the supervision of Joyce Manchester and Ralph Smith. Alshadye Yemane assisted with data and tabulations. The paper benefited from comments by Patrick Bernhardt, Sheila Dacey, Robert Dennis, Douglas Hamilton, Jonathan Morancy, Benjamin Page, Sam Papenfuss, William Randolph, and Frank Sammartino, all of CBO, as well as David Johnson of the Census Bureau and Gary Solon of Michigan State University. (The assistance of external reviewers implies no responsibility for the final product, which rests solely with CBO.)
Sherry Snyder edited the paper, and Loretta Lettner proofread it. Maureen Costantino took the photograph for and designed the cover and prepared the paper for publication. Lenny Skutnik printed copies of the report, Linda Schimmel handled the distribution, and Simone Thomas produced the electronic version for CBO’s Web site.
Contents
Variability in Individual Earnings
Variability in Individual Earnings Over Time
Variability in Individual Earnings, by Sex, Age, and Earnings Quintile
Variability in Household Income
Variability in Household Income Over Time
Variability in Household Income, by Age, Education, Household Structure, and Income Quintile
Appendix: Data, Methods, and Alternative Measures of Variability
A-1. Characteristics of Households in the Matched Sample
1. Distribution of Changes in Workers’ Annual Real Earnings from 2002 to 2003
4. Distribution of Changes in Households’ Annual Real Income from 2004 to 2005
5. Percentage of Households Whose Income Changed by 25 Percent or More from the Previous Year
A-2. Standard Deviation of the Percentage Change in Workers’ Earnings, by Sex
A-3. Standard Deviation of the Difference in the Logarithm of Workers’ Earnings, by Sex
