Study: Earnings instability

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Lone mothers had the highest degree of volatility in earnings of any family type during the past two decades, according to a new study.

Earnings instability was measured by short-term, up-and-down movements in an individual's or family's earnings around a longer-term average.

For instance, the volatility in earnings among lone mothers aged 30 to 34 during the 1999 to 2004 period was almost twice that of two-parent families with a husband in the same age group. Without a second adult earner, lone mothers have a limited ability to smooth the flow of earnings.

The study also found that earnings instability rose for lone mothers under 40 years of age between the 1984 to 1989 period and the 1999 to 2004 period. In contrast, two-parent families showed little indication of a widespread increase in volatility.

The study, published today in the online edition of Perspectives on Labour and Income, found no evidence that volatility in earnings among unattached men rose during the past two decades. However, among unattached women, it increased in all but the youngest age groups. The instability among unattached women was lower than that of lone mothers, but higher than that of two-parent families.

Government transfers, such as Employment Insurance, and the tax system both play roles in reducing income instability. However, Employment Insurance has been a more important means for unattached individuals, while social assistance has played a key role for lone mothers.

In all age groups, social assistance appeared to be the single most important factor in reducing income instability among lone mothers, much more than for two-parent families. In the youngest age group, for example, it reduced instability among lone mothers in the lowest third of the income distribution by 32%.

Employment Insurance was the second most important factor in mitigating instability among lone mothers in the lowest income group. Tax credits and especially family benefits also played an important role for this group.

Employment Insurance was a far more important factor in reducing instability among unattached individuals. It reduced instability among unattached men in the bottom third of the income distribution by 17% to 24%, and among unattached women by 13% to 20%.

Definitions, data sources and methods: survey number 4107.

The article "Earnings instability" is now available in the online edition of Perspectives on Labour and Income (75-001-XIE) from the Publications module of our website.

For further information or to enquire about the concepts, methods or data quality of this release, contact René Morissette (613-951-3608, rene.morissette@statcan.gc.ca), Business and Labour Market Analysis Division.