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

Avram, Silvia and Brewer, Mike and Fisher, Paul and Fumagalli, Laura (2021) 'Household Earnings and Income Volatility in the UK, 2009-2017.' The Journal of Economic Inequality. ISSN 1569-1721

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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.

Item Type: Article
Uncontrolled Keywords: Income volatility; Income risk; Taxes; Transfers; Insurance; Recession; Austerity; Longitudinal data
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Institute for Social and Economic Research
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 11 Jan 2022 14:57
Last Modified: 17 Jan 2022 13:47
URI: http://repository.essex.ac.uk/id/eprint/31997

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