Association for Public Policy Analysis & Management

In addressing childhood poverty, both research and policy have historically conceptualized income as a static state, measured at one point-in-time or averaged across time. Yet, profiles of household finances, and documentation of trends, suggest that income volatility for households with children has increased over time. Whether triggered by job loss, inconsistent work hours, gaps in support from the safety net, or disruptions in family relationships, the effects of income volatility on family life may be consequential and distinct from those of persistently low-income. Empirical investigations of income volatility’s relation with family and child outcomes are hampered by the availability of data with frequent measurement of income coupled with information about family life or children’s well-being. This paper describes efforts to document and examine whether income volatility has distinct influences on children’s outcomes using two different data sources.

National data such as the Survey of Income and Program Participation (SIPP) offers one opportunity to estimate experiences of income volatility with a variety of measures to capture amount, frequency and lengths of time of income stability. Whereas the SIPP has total monthly household income information (which is unusual among surveys of its kind), it only offers a small set of parent-reported family and child well-being measures. Furthermore, the measures that are available are entirely based on parental self-reports and are potentially subject to suffer from biases associated with the strains of income volatility. Longitudinal administrative data offers a potentially alternative complementary source. The income and outcome information is available with intra-year frequency and does not suffer from self-report bias, however, not all sources of income will be captured through administrative records. Irrespective of data type, methodologically, potential selection bias is a challenging threat to identifying the effects of income volatility. Both the SIPP and longitudinal administrative data offer opportunities to implement panel data techniques to capture some of the omitted variable bias that might plague other research.

We present and compare multiple constructs of income volatility experienced among children from low to middle income households using national survey data and administrative data from a New York City sample of working poor families. We then estimate the relation of income volatility to available children’s schooling outcomes paying specific attention to child age and developmental milestones. Household income volatility is highest among the lowest income households but also varies across and within developmental stages of children, even among low-income samples. Consistent with prior research, higher income was associated with better children’s schooling outcomes in both analyses. High income volatility is associated with worse school attendance among 4^th and 7^th graders, relative to stable income or moderate income volatility in the New York City sample. Income instability is also associated with lower school engagement and higher incidence of expulsions and suspensions among the lowest income adolescents in the national sample. Using these two example, implications for research--trade-offs and challenges in measurement and identification of income volatility’s impacts on children’s development—are discussed.