How Risky Are Recessions for Top Earners?

To answer these questions, we use a confidential panel dataset on earnings histories from the US Social Security Administration (SSA), which allows us to follow workers’ earnings over the business cycle. Our approach is to identify individuals who were in the top 1 percent of the earnings distribution just prior to the economy entering a recession or boom. We ask how the evolution of these workers’ subsequent earnings compares with the evolution of workers’ earnings from the rest of the population, and how these differences vary by sector. Despite the extensive recent attention given to top earners, surprisingly little is known about the answers to these two questions, largely due to the lack of detailed panel data with sufficient coverage at the top of the earnings distribution. Panel data is necessary to study the dynamics inherent in these questions. However, most survey-based datasets underrepresent very high earners, because of the extremely low response