Well explained! We see the same phenomenon in bank "savings" accounts, which only pay a meager interest rate, but protect the saver from essentially all the dow

Well explained! We see the same phenomenon in bank "savings" accounts, which only pay a meager interest rate, but protect the saver from essentially all the downside risk. (Contrast with, for example, investing directly in the stock market, etc.) Just for fun, I'm going to poke at this: > ... [T]here is no practical way to budget for randomly giving most people large pay raises throughout the year I think we can find examples of labor markets that do expose more "upside" to workers, and then see how the "downside" is handled in those instances. Contractors (1099 in the U.S.) comes immediately to mind... They typically make a lot higher rate (I'd guess around double although I often hear lower numbers, which I personally think is too low to make it a good deal) but must pay their full income tax (instead of half), their full health insurance, and are subject to be the first to be let go when the company needs to cut costs, i.e. higher risk of termination, so must be able to save for time between jobs. "Boom" economies can drive labor prices very high. I think we've been seeing this in temporary nursing lately, where the wages go very high, especially if you're willing to travel or locate in remote places. Of course, the "boom" doesn't last forever, and eventually wages will stabilize at a lower rate. Note again that these temporary positions. (So far it seems like the higher wages come with more "risk" put onto the laborer.) I'm sure there are some even better examples.