- How Job Risk and Human Capital Shape Male Lifetime Earnings Disparities
FRB of St. Louis
In our previous blog post, we discussed the differences in job mobility patterns across the lifetime earnings (LE) distribution to shed some light on the determinants of inequality.1 This descriptive analysis suggests that male earners at the lowest end of income distribution are less likely to build stable careers because they have higher unemployment risks and a lower likelihood of working for better employers.2 In contrast, male workers above the median of the income distribution have more-stable jobs, but they differ mostly in returns to work experience (or the ability to learn on the job).
In a 2022 working paper, economists Serdar Ozkan, Jae Song and Fatih Karahan used these descriptive facts to estimate an econometric model of job ladder risk―specifically, job loss risk, job finding rate and rate of job offers from competing employers―and human capital accumulation.3 They used the estimated model to provide exact measures of differences in job ladder risk as well as the heterogeneity in the ability to learn on the job. They also quantified the importance of these different factors for lifetime earnings inequality among men. In this blog post, we summarize their findings.