Understanding Society Working Paper Series 2019-07
Household income volatility in the UK, 2009-2017
19 Jul 2019
We study the volatility of individual- and household-level income in the UK between 2009 and 2017 using data from a large longitudinal household panel survey. The volatility of earnings for the working-age has fallen in this period, largely due to a fall in the prevalence of large negative earnings shocks. For older aged individuals, we also find a large fall in the volatility of private income, mainly as a result of a fall in large positive income shocks. The tax and benefit system significantly reduces volatility, especially for household containing older individuals. We find evidence that the tax and benefit system has become less well equipped to counteract swings in labour income, but the most important reason why disposable income volatility has fallen over this period is changes to the volatility of employment.