How the economy affects personal earnings
The relationship between GDP and individuals’ income depends on what they do
By THE DATA TEAM
ECONOMIC growth doesn’t always lead to bigger pay packets. But it helps. A new study by economists Fatih Guvenen of the University of Minnesota, Sam Schulhofer-Wohl of the Chicago Federal Reserve, Jae Song of the United States Social Security Administration and Motohiro Yogo of Princeton University looks at how individuals’ incomes change depending on the fluctuations of the economy.
The authors find that the effects of GDP changes are different for people of different income levels. Low-wage workers are highly exposed to the changes in the economy because they tend to work in pro-cyclical sectors, like construction and manufacturing. By contrast, the rich are highly exposed because more of their income comes in the form of bonuses and stock options.
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