Economic insecurity describes the risk of economic loss faced by workers and households as they encounter the unpredictable events of social life. Our review suggests a four-part framework for studying the distribution and trends in these economic risks. First, a focus on households rather than workers captures the microlevel risk pooling that can smooth income flows and stabilize economic well-being. Second, insecurity is related to income volatility and the risk of downward mobility into poverty. Third, adverse events such as unemployment, family dissolution, or poor health commonly trigger income losses. Fourth, the effects of adverse events are mitigated by insurance relationships provided by government programs, employer benefits, and the informal support of families. Empirical research in these areas reveals high levels of economic insecurity among low-income households and suggests an increase in economic insecurity with the growth in economic inequality in the United States.
From 1975 to 2005, the variance in incomes of American families with children increased by two-thirds. In attempting to explain this trend, labor market studies emphasize the rising pay of college graduates, while demographers typically highlight the implications of family structural changes across time. In this article, we join these lines of research by conceiving of income inequality as the joint product of the distribution of earnings in the labor market and the pooling of incomes in families. We develop this framework with a decomposition of family income inequality using annual data from the March Current Population Survey. Our analysis shows that disparities in education and single parenthood contributed to income inequality, but rising educational attainment and women's employment offset these effects. Most of the increase in family income inequality was due to increasing within-group inequality, which was widely shared across family types and levels of schooling.
Racial disparity in family incomes remained remarkably stable over the past 40 years in the United States despite major legal and social reforms. Previous scholarship presents two primary explanations for persistent inequality through a period of progressive change. One highlights continuity: because socioeconomic status is transmitted from parents to children, disparities created through histories of discrimination and opportunity denial may dissipate slowly. The second highlights change: because family income results from joining individual earnings in family units, changing family compositions can offset individuals’ changing economic chances. I examine whether black-white family income inequality trends are better characterized by the persistence of existing disadvantage (continuity) or shifting forms of disadvantage (change). I combine cross-sectional and panel analysis using Current Population Survey, Panel Study of Income Dynamics, Census, and National Vital Statistics data. Results suggest that African Americans experience relatively extreme intergenerational continuity (low upward mobility) and discontinuity (high downward mobility); both helped maintain racial inequality. Yet, intergenerational discontinuities allow new forms of disadvantage to emerge. On net, racial inequality trends are better characterized by changing forms of disadvantage than by continuity. Economic trends were equalizing but demographic trends were disequalizing; as family structures shifted, family incomes did not fully reflect labor-market gains.
Regression-based studies of inequality model only between-group differences, yet often these differences are far exceeded by residual inequality. Residual inequality is usually attributed to measurement error or the influence of unobserved characteristics. We present a regression that includes covariates for both the mean and variance of a dependent variable. In this model, the residual variance is treated as a target for analysis. In analyses of inequality, the residual variance might be interpreted as measuring risk or insecurity. Variance function regressions are illustrated in an analysis of panel data on earnings among released prisoners in the National Longitudinal Survey of Youth. We extend the model to a decomposition analysis, relating the change in inequality to compositional changes in the population and changes in coefficients for the mean and variance. The decomposition is applied to the trend in US earnings inequality among male workers, 1970 to 2005.
The declining prevalence of two-parent families helped increase income inequality over recent decades. Does family structure also condition how economic (dis)advantages pass from parents to children? If so, shifts in the organization of family life may contribute to enduring inequality between groups defined by childhood family structure. Using National Longitudinal Survey of Youth data, I combine parametric and nonparametric methods to reveal how family structure moderates intergenerational income mobility in the United States. I find that individuals raised outside stable two-parent homes are much more mobile than individuals from stable two-parent families. Mobility increases with the number of family transitions but does not vary with children’s time spent coresiding with both parents or stepparents conditional on a transition. However, this mobility indicates insecurity, not opportunity. Difficulties maintaining middle-class incomes create downward mobility among people raised outside stable two-parent homes. Regardless of parental income, these people are relatively likely to become low-income adults, reflecting a new form of perverse equality. People raised outside stable two-parent families are also less likely to become high-income adults than people from stable two-parent homes. Mobility differences account for about one-quarter of family-structure inequalities in income at the bottom of the income distribution and more than one-third of these inequalities at the top.
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