Abstract

Associations between family income and child developmental outcomes are well documented. However, family income is not static but changes over time. Although this volatility represents income shocks that are likely to affect children’s lives, very few studies have so far examined its effect on early cognitive development. This study investigated associations between family income, volatility, and changes in cognitive outcomes in early childhood and examined whether these associations are dependent on a family’s overall income position. Data for the study spanned five waves of the Growing Up in Scotland longitudinal survey (N = 3,621). Findings indicate that income volatility was more prevalent among disadvantaged sociodemographic groups. In addition to average income, short-term volatility was associated with changes in child cognitive outcomes from ages 3 to 5. While upward volatility was associated with gains in expressive vocabulary, downward and fluctuating volatility were associated with declines in child problem-solving abilities. The association between volatility and changes in cognitive outcomes was similar for both children living in poverty and those from medium–high-income households. Our results suggest that policies aiming to cushion all families from negative income shocks, boost family income to ensure stability, and take low-income families out of poverty will have a significant impact on children’s cognitive development. Additionally, a more nuanced conceptualization of income is needed to understand its multidimensional impact on developmental outcomes.

Highlights

  • Strong associations exist between family income and cognitive development, with children from low-income households having significantly lower cognitive outcomes compared to peers from affluent backgrounds (Yeung et al, 2002; Dickerson and Popli, 2016; Cooper and Stewart, 2021)

  • The only study we found that examined income volatility and cognitive ability in early childhood reported a non-significant effect of 30% downward volatility on cognitive outcomes (Yeung et al, 2002)

  • In order to reduce the probability of biased estimates associated with missing data, we addressed the problem of missing income across waves prior to computing the different forms of income dynamics

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Summary

Introduction

Strong associations exist between family income and cognitive development, with children from low-income households having significantly lower cognitive outcomes compared to peers from affluent backgrounds (Yeung et al, 2002; Dickerson and Popli, 2016; Cooper and Stewart, 2021). This early inequality in cognitive ability determines educational, health, and labor market outcomes in adulthood (Carneiro et al, 2007; Schoon, 2010; Henderson et al, 2012; Hardy, 2014), and accounts for the intergenerational transmission of disadvantages This lack of nuance in how family income is conceptualized is problematic because it misses the effect of other dynamics of income on developmental outcomes and does not fully capture all individuals who may experience economic hardship (Bradshaw and Finch, 2003; Dynan et al, 2012)

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