Trends in men's earnings volatility: What does the Panel Study of Income Dynamics show?

Many recent studies have investigated trends in U.S. men's earnings volatility, but the studies based on the Panel Study of Income Dynamics appear to conflict with each other and with studies based on other data. We critique some of the existing methods of measuring earnings volatility, and we advocate for transparent methods that focus on simple measures of dispersion in year-to-year earnings changes. Applying such measures in the PSID, we find that, apart from the well-known counter-cyclicality of earnings volatility, men's earnings volatility increased during the 1970s, but did not show a clear trend afterwards until a new upward trend appeared after 1998.

Research highlights► We critique some existing methods of measuring earnings volatility. ► We advocate for simple measures of dispersion in year-to-year earnings changes. ► We find that earnings volatility of men in the PSID increased during the 1970s. ► The trend afterwards was less clear until a new upward trend appeared after 1998.