Income Voluatility

Read "Income volatility is less of a problem than America's Democrats think" in The Economist, January 4th 2007.

This Economic Focus article from The Economist suggests that the observed increase in income volatility may not be as negative a trend as one might think. It cites examples in which people voluntarily give up income, such as when a woman leaves the workforce for a while to have the family's children. It also suggests that people often have the resources that they can continue to consume at their established levels even when income drops off.

I would have expected other points to be raised. For example:

* People living at the subsistence level fear loss of income that could drop them below subsistence; the social safety net legislation was initiated to protect such people. As poverty levels decline, there is less need to have methods to assure basic human needs are met when incomes are reduced.

* Typically, higher rates of return require one to assume higher risks. It people have the resources to allow them to be less risk adverse, they may be able to invest time, effort and money in activities with higher expected returns even if they also have higher risk. A trend of people making higher risk, higher average return investments would appear to be very positive for the economic growth of a society, and consistant with a correlation between economic growth and income volatility (as a greater portion of the riskier investments fail).