The Hidden Volatility of American Paychecks

Most American workers—especially those paid by the hour—can’t count on a steady paycheck from one month to the next, new research shows. Even when they keep the same job, their income often swings dramatically as employers adjust schedules and hours. For millions of households living paycheck to paycheck, that hidden volatility can mean the difference between paying the rent on time or falling behind—and it’s a challenge policymakers have largely overlooked.

A new study from Associate Professor Peter Ganong and coauthors Pascal J. Noel, Christina Patterson, Joseph S. Vavra, and Alexander Weinberg uses high-frequency payroll and Chase bank data to reveal that workers’ earnings fluctuate in roughly three-quarters of months, usually because of shifts in hours, not wages. The findings suggest that job stability doesn’t guarantee income stability—and that workers are bearing financial risks that employers or policymakers might be better positioned to absorb.

“For many workers, the problem isn’t losing a job—it’s losing hours,” said Ganong. “When your paycheck changes from month to month, it’s incredibly hard to budget, save, or build financial security. Policymakers should recognize that income instability is a form of inequality hiding in plain sight.”

The median monthly change is around 5 percent, and in one-quarter of months, it is 17 percent or more. For these workers, whose livelihoods depend on the hours they are scheduled, even small reductions can translate into major income swings.

Hourly workers, who make up about 60 percent of the U.S. workforce, face far more volatility than salaried employees. The median monthly earnings change for hourly workers is 9 percent, compared to negligible variation for salaried employees.

The volatility is also unequal across income levels. Lower-income workers face both higher earnings volatility and lower financial buffers, making them particularly vulnerable to unexpected income drops. As Ganong and his coauthors write, “The most financially fragile workers also face the greatest variability in pay.”

One of the paper’s key contributions is identifying where this volatility comes from. The researchers show that most month-to-month changes in hours are firm-driven, not the result of worker preferences or predictable seasonal patterns.

By analyzing total hours worked at the firm level, they find that fluctuations in companies’ labor demand explain roughly half of the volatility individual workers experience. Even after accounting for this, firms’ scheduling and management practices appear to contribute further to instability, suggesting that many workers’ paychecks depend on decisions largely outside their control.

To test whether these fluctuations matter for workers’ welfare, the researchers link earnings data with spending and bank account balances. They find that income volatility directly translates into spending volatility, particularly for low-liquidity households who have less ability to smooth over shortfalls.

The instability also affects labor mobility. Hourly workers are more likely to quit high-volatility jobs, even after accounting for differences in wages and worker characteristics. This behavior suggests that workers view stability itself as a valuable job attribute—one worth paying for.

Using two complementary methods, the researchers estimate that a typical hourly worker would be willing to give up 4-11 percent of their income to obtain the income stability enjoyed by a median salaried worker.

Earnings instability, the study concludes, is a meaningful and underappreciated source of economic risk. Because this instability is concentrated among low-income, hourly workers, it amplifies inequality beyond what wage gaps alone would suggest.

These findings raise important questions for both researchers and policymakers. If firm scheduling and labor demand drive much of this instability, could improved management practices or labor regulations reduce its impact? Some U.S. cities have experimented with “fair workweek” laws that limit unpredictable scheduling, while other countries use mechanisms like short-time work or working-time accounts to cushion volatility.

Future research, the authors note, should explore how such institutions balance firms’ need for flexibility with workers’ need for stability—and how high-frequency earnings risk should be incorporated into models of income and consumption dynamics.

By combining detailed payroll and bank data, the paper provides evidence that short-term fluctuations in earnings are widespread, significant, and costly to workers. For policymakers, the message is clear: while the U.S. labor market may appear stable when viewed annually, beneath the surface most workers live with a level of month-to-month uncertainty that profoundly shapes their financial security and economic behavior.