Earnings mobility and the Great Recession

Abstract

OBJECTIVE : The Great Recession of 2007-09 was a very significant economic event with substantial effects across the economy. An important but unexplored consequence of the Great Recession is its effect on income or earnings mobility. In this paper we explore the effect of the Great Recession on earnings mobility among low-wage workers. METHODS : Using Georgia administrative data, we identify quarterly earnings of low-income individuals over 14 years. We calculate earnings mobility indices for 7-year periods and explore the differences in mobility between the pre- and post-Great Recession periods. We also calculate earnings mobility indices for 51 overlapping three-year (12-quarter) intervals over the 2000 to 2015 period. RESULTS : We find that mobility is greater in the post-Great Recession period. We also find that there is substantial variation in mobility indices in the post-2007 period and that the variation in three-year mobility indices is closely related to the unemployment rate. CONCLUSIONS : The magnitude of earnings mobility was affected by the Great Recession and by the unemployment rate in general. An understanding of earnings mobility during times of economic upheaval helps policy makers better evaluate the overall impact of recessions.