Household income volatility in the UK and the role of the tax and benefit system, 2009-2016
|Day:||Wed 3 Jul|
We study the volatility of individual- and household-level income in the UK between 2009 and 2016 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-benefit system significantly reduces volatility, especially for household containing older age individuals. We find evidence that the tax-benefit system has become less well equipped to counteract swings in labour income but changes in disposable income volatility are driven by changes in employment.