Trends and Divergences in Childhood Income Dynamics, 1970-2010

Earnings and income variability have increased since the 1970s, particularly at the bottom of the income distribution. Considerable evidence suggests that childhood income levels-captured as average or point-in-time yearly income-are associated with numerous child and adult outcomes. The importance to child development of stable proximal processes during childhood suggests that income variability may also be important, particularly if it is unpredictable, unintentional, or does not reflect an upward trend in family income. Using the Panel Study of Income Dynamics, this study documents trends since the 1970s in three dimensions of childhood income dynamics: level, variability, and growth (n=7991). The analysis reveals that income variability during childhood has grown over time, while income growth rates have not. In addition, the economic context of childhood has diverged substantially by socioeconomic status, race, and family structure, with the most disadvantaged children facing a double-whammy of low income and high variability.