Childhood income volatility harms adult outcomes

Being exposed to family income instability as a child leads to lower educational attainment in later life, according to research in America. The study looks at the relationship between income instability and adult outcomes over a period of nearly 40 years, prompted by a rise of one-third in income volatility in the United States since the 1970s.

Key points

  • Family income instability during childhood is associated with a higher drop-out rate from secondary school, especially among children from lower-income households.
  • Those who drop out experience far higher rates of unemployment, lower family income and earnings, and are more likely to engage in criminal activity.
  • A 'modest' policy solution would be to promote precautionary savings among families, providing insurance against unanticipated events.
  • A more 'ambitious' plan would be to direct additional public resources to education, in addition to the existing safety net measures on food, housing and benefits. This might slowly weaken the link between low, unstable incomes and educational attainment.

Source: Bradley Hardy, Childhood Income Volatility and Adult Outcomes, Discussion Paper DP2012-03, University of Kentucky Center for Poverty Research
Link: Paper