Income Volatility and Psychological Depression

Income volatility appears to be increasing especially among lower income workers. Such volatility may reflect the ongoing shift of economic risk from employers to employees as marked by decreasing job security and employer-provided benefits. This study tests whether absolute volatility or downward volatility in income predict depression controlling for prior depression. A sample (n = 4,493) from the National Longitudinal Survey of Youth (NLSY79) with depression (CESD) measured at age 40 and prior depression measured eight to 10 years earlier was utilized. Downward volatility (frequency of income loss) was positively associated with depression; adjusting for downward volatility and other covariates, absolute volatility was negatively associated with depression. An interaction indicated a positive association between downward volatility and depression only when absolute volatility was high. These findings apply to respondents in a narrow age range (30 s) and the results warrant replication to identify the mediators linking absolute volatility and income loss to depression.