Is Income Getting Riskier?

Recently research showed that, on average, income was getting more volatile in America. The variance in earnings is getting higher, meaning that people are more likely to experience a really bad outcome (losing a job or having a big pay cut). And this obviously makes people nervous.

But a few points to note on this:
1) Higher volatility means that bad outcomes are more likely, but so are good outcomes (getting a big bonus or having your business take off). Volatility means that both extremes are more likely.
2) Further research shows that most of the increase in volatility for the average American is driven by increased volatility for a very small group of Americans. And no, it's not those at the bottom of the income distribution. The people who already had the riskiest incomes (e.g. small business owners) were responsible for the entire increase in average volatility. In other words, the typical working Joe has not seen any increase in volatility. But if you own a small business, your prospects will swing around much more than before.

Does this matter? I would argue that it does not. People who start small businesses do so precisely because they are high risk. The only way to become Bill Gates is to max out the credit card and start Microsoft in your garage. Risk and reward are related - you can't earn big profits without taking the plunge. So the fact that riskiness is rising for small businesses probably means that those who "win" will actually do even better - meaning that more profitable businesses are being created, and maybe this means more jobs.