We present evidence of a robust relationship between idiosyncratic labor income risk and equity risk factors in the US market. Notably, the value factor stands out as more significant than other factors in explaining well-known patterns in idiosyncratic labor income risk. Idiosyncratic labor earnings dispersion tends to increase with greater dispersion in factor exposure or greater factor volatility, reflecting significant heterogeneity in exposure to equity risk factors across different income quintiles and sectors. Furthermore, we identify a positive correlation between idiosyncratic earnings skewness and the value factor, suggesting that labor earnings tail risk is driven by value-related risks in the job market. Extending our analysis to firm-level data, we find that firms’ net income and revenue dispersion also correlate with risk factor volatility, mirroring the patterns observed in labor earnings.
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