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The rising instability of family incomes |
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From Economic Policy Institute: The Great Risk Shift (Hacker 2006; revised and expanded in 2008) documented a major post-1970s rise in family income instability and argued that it was one indicator of an increasing shift of economic risk from government and employers onto workers and their families. There is an important distinction between family income (total earnings, asset income, and transfer income for all members of a family) and individual earnings. More important, all of these measures---transitory variance, the standard deviation of income changes, and the probability of large income drops---show a substantial increase in family income instability. A final note before moving to the results themselves: While the PSID is a well-regarded data source used by many of the nation's top social scientists, questions have been raised about the quality of the data in the 1990s, when the survey procedures changed. The CBO study brings together individual earnings data from the Continuous Work History Sample (CWHS), based on Social Security wage records, with longitudinal family income data from the Survey of Income and Program Participation (SIPP). According to those in attendance when the CBO's preliminary results were presented at the American Economic Association's annual meeting in early January, the CBO actually found an increase in family income volatility when it used the SIPP data alone. A wealth of research in psychology and economics suggest that major income fluctuations create not just financial hardship, but also anxiety and discontent.
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