Association for Public Policy Analysis & Management

Panel: Income Volatility Among the Economically Disadvantaged

(Poverty and Income Policy)

Since the 1970s, low- and moderate-income families have faced increasingly high levels of earnings and income volatility. These trends are driven by increasing between and within job instability, fluctuations in public benefits tied to employment, and fragile family structures. This panel delves deeply into the problem of income volatility to develop conceptual distinctions between beneficial and harmful income change, and to examine the relationship between income volatility and other measures of economic well-being, including poverty and wealth. A more nuanced understanding of income volatility is particularly important for public policy researchers and practitioners, as income fluctuations can alter participation in public programs, and can either be smoothed or amplified by public benefits. The first paper develops a conceptual framework for examining economic instability in low-income family life. The authors provide a typology of income change and relate the causes of change —employment, family structure, and public benefit volatility— to different concepts of economic instability in an effort to help academics and policy makers consider economic instability more explicitly public policy research. The second paper seeks to understand the drivers in episodic poverty for low- and moderate-income households. Using data from the US Financial Diaries project, the author tracks transactions for 235 households in four cities to relate major life events and earnings fluctuations to monthly income volatility and entry and exit from poverty. The third paper provides a national view of how wealth and income distributions map onto income volatility and exposure to income drops for individuals within income and race/ethnicity groups. Using data from the Federal Reserve Survey of Household Economics and Decision Making and the Panel Study of Income Dynamics, the authors stratify their sample across wealth, income, and race to examine to get a complete picture of the risks faced by and resources available to economically vulnerable groups. Our discussant, Laura Tach of Cornell, has published on the increase in economic insecurity in the U.S.