Economic Instability Trends and Levels across Household Surveys

April 2011

Scott Winship, The Pew Charitable Trusts

Download 'working_paper11-13.pdf'.


Abstract

Understanding trends in economic instability is vital if economic and social policies aimed at mitigating economic risk are to be effective. Despite the popular perception that economic instability has been rising—and a research literature that often support this perception—recent studies have cast doubt on the conventional wisdom. At the same time, previous research that has used disparate measures, datasets, and methodological choices provides little guidance to account for different findings across studies. This report addresses this problem by estimating comparable trends in economic instability across three of the most-used household surveys—the SIPP, CPS, and PSID. I find that comparing estimates depends crucially on how imputed income components are addressed. The SIPP indicates that economic instability has not changed much over 40 years. The PSID results mirror those of the SIPP for male and female earnings but show a small increase in the instability of household incomes. The CPS tends to show increases in instability, which become modest after excluding incomes dominated by imputation. However, features of the SIPP—along with the results of my analyses—give reason to believe that the SIPP estimates are the most valid of the three surveys. The results call into question the concept of a "Great Risk Shift" in general and the validity of the recently developed Rockefeller Economic Security Index in particular.



Keywords:
Employment, Unemployment, and the Labor Market, Research Methods