Volatility at the top
Jonathan Parker, quoted by Tim Taylor:
“"[I]n work with Annette Vissing-Jorgensen we have looked at how the labor income of high-income households has changed significantly. What we zoomed in on is that high-income households used to live a relatively quiet life in the sense that the top 1 percent would earn a relatively stable income, more stable than the average income. When the average income dropped by 1 percent, the incomes of the top 1 percent would drop by about only six-tenths of a percent. In the early 1980s that switched, so that in a recession if aggregate income dropped by 1 percent, the incomes of the top 1 percent dropped more like 2.5 percent — quadrupling the previous cyclicality. So now they're much more exposed to aggregate fluctuations than the typical income.
We also show that decade by decade, as the top income share increased, so did its exposure to the business cycle in the 1980s, 1990s, and 2000s. And as you go further and further up the income distribution, that top share — not just the top 1 percent, but the top 10th of a percent, and the top 100th of a percent — there's also been a bigger increase in inequality and a bigger increase in the exposure to the business cycle. …
We do know that increased cyclicality in income among high earners can't come simply from the financial sector. That sector just isn't quantitatively big enough, and you see the increase in earnings share and in cyclicality across industries and occupations.”
Parker also notes that the BLS is considering abandoning the panel dimension of the Consumer Expenditure Survey.
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