Is involuntary income volatility linked to worker health? Numerous works have identified various socioeconomic determinants of health, including income level, employment security, living conditions, public service support, and structural inequality. However, the impact of frequent fluctuations in individual income (also called intrayear income volatility) remains an important but often overlooked factor.

The health care cuts in the recently passed One Big Beautiful Bill Act have raised concerns about the potential economic impact on working families in the years to come. In particular, Medicaid work requirements overlook labor market unpredictability, creating financial risks for low-income workers. The issue is not that people are unwilling to work, but that many individuals face unstable employment, irregular hours, and thus fluctuating pay throughout the year.

It is important to take the issue of income volatility seriously. Income instability in childhood is associated with increased rates of depression and other behavioral health issues in young adults. Young people experiencing income fluctuations are also more likely to face mental health challenges throughout the year. Individuals with unpredictable income often struggle to afford out-of-pocket medical costs. Further, the current eligibility or verification system may not keep up with the reality that many workers’ incomes fluctuate during the year. Unlike those with stable low incomes, many workers move in and out of eligibility for public benefits at some point each year. This can cause coverage gaps, delay preventive care, or worsen chronic conditions. 

In this analysis, I use monthly panel data to illustrate whether a worker’s earnings volatility within a year associates with their health status at the end of a year, net of other socio-economic characteristics. The sample includes workers aged 24 and older who reported being employed at the start of the interview and do not stop working or work part time due to any of the following reasons: taking a vacation, attending school, taking leave, experiencing chronic health problems or injury, having family or personal obligations.

The results indicate that poor health is more common among workers with higher earnings instability (defined as the upper third of the volatility index), even after adjusting for workers’ baseline health condition, age, gender, race or ethnicity, education, place of residence, income level, industry and whether they live in a household with children.

For those experiencing high-level volatility throughout the year, the risk of poor health is more than 1 percentage point higher compared to the group with the lowest volatility. Simply put, the predicted probability of poor health is about 10.4 percent for workers in the highest volatility group (see Figure 1). Of all surveyed workers, 9 percent report poor health; higher earnings volatility accounts for about 11 percent of the overall risk of poor self-rated health.

This disparity in health ratings is more pronounced among workers in households with income at or below 138 percent of the federal poverty level. In this low-income group, those with higher earnings churn have about a 16 percent chance of reporting poor health. This is nearly a quarter higher than the 13 percent rate in the lowest instability group.

Figure 1

While several factors contribute to income instability throughout the year, the main causes are unstable employment and employer-driven irregular work hours. Earlier work has indicated that most Medicaid beneficiaries are employed, but fluctuations in their work hours are typically beyond their control.

As shown here, intra-year income fluctuations among workers are closely linked to their self-rated health at year-end, even when adjusting for baseline health status. Many unobserved factors likely play a larger role in individual health, and we do not observe whether a worker has health shocks during the year. However, this analysis shows involuntary income volatility alone contributes to roughly 21 percent of the observed risk of poor health for low-income workers at the end of the year. Imposing Medicaid’s rigid work-hours test will penalize those with variable work schedules and income, disrupt program enrollment, delay access to care, and ultimately undermine productivity and public health.