Imputing lifetime incomes: Baseline projections for the UK

Most studies that report distributional comparisons of income focus on income evaluated over periods that vary between one week and one year. Distributional studies of weekly income recognise the importance of short-term constraints, particularly in relation to material deprivation and poverty. Distributional studies of annual income recognise the capacity of many people to save the proceeds of temporary income peaks to carry them through temporary income troughs. Income measured over longer periods is rarely analysed due to the relative (in)availability of survey data, rather than any more fundamental motivation. Unfortunately, analysis of lifetime incomes for contemporary population cross-sections is complicated in part by the limited historical context captured by existing panel studies, and in part because future incomes are unobservable. Microsimulation is one method to fill gaps in the available statistical record. This study describes how microsimulation methods were used to project lifetime incomes for a contemporary population cross-section of the UK.