Household Earnings and Income Volatility in the UK, 2009–2017

Silvia Avram, Mike Brewer, Paul Fisher and Laura Fumagalli
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Silvia Avram: University of Essex
Laura Fumagalli: University of Essex

The Journal of Economic Inequality, 2022, vol. 20, issue 2, No 4, 345-369

Abstract: Abstract We study the volatility of sources of individual and household level income in the UK in the years 2009-2017, following the Great Recession and government austerity. We find that the volatility of (pre-tax) earnings and disposable income has fallen for the working-age in this period, largely due to fewer negative and large earnings shocks. For older individuals, we also find a fall in the volatility of private income, mainly due to fewer positive and large income shocks. Taxes and transfers help stabilise incomes, with social security cash benefits and income-dependent refundable tax credits reducing household private income volatility by around a quarter for the working age, and 40 percent for those aged 60 or over. However, over the sample period, taxes and benefits became less well correlated with earnings, reducing their ability to counteract swings in labour income. The findings illustrate the consequences of fiscal retrenchment and the cut-backs to welfare benefits on the stability of incomes.

Keywords: Income volatility; Income risk; Taxes; Transfers; Insurance; Recession; Austerity; Longitudinal data (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10888-021-09517-3

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