Stable Firms and Unstable Wages

Abstract

In this work I study recent developments in �rm employment and earnings instability in the US economy over the last 30 years. Despite the decline in aggregate and �rm level volatility, earnings instability has increased steadily for job stayers since the late seventies. I measure and model these phenomena as a result of a decline in labor market institutions that compress wage volatility, and an increase in the incidence of compensation schemes that attach wages to worker performance.