Transition Events in the Dynamics of Poverty. 2. Events Associated with Entries into and Exits from Poverty

09/01/2002

Poverty Entries

Descriptive analyses by Bane and Ellwood (1986), Ruggles and Williams (1987), and Blank (1997), who study all individuals, and Duncan and Rodgers (1988), who study children, find similar results concerning events associated with transitions into poverty. These analyses find that changes in labor supply and earnings are more commonly associated with poverty entries than changes in household structure and composition. Ruggles and Williams find that of the people who enter poverty, 40 percent live in a household that experienced a job loss by the head, spouse, or other household member (p. 13). Bane and Ellwood find that almost half (49.3 percent) of poverty spells begin when the household experiences a decline in earnings: 37.9 percent of poverty entries coincide with a fall in heads' earnings and 11.4 percent of entries coincide with a fall in wives’ or other family members’ earnings (pp. 14-15). Blank also finds that a large share of poverty entries (42.8 percent) occur with a fall in heads’ earnings (p. 26). Other events experienced by persons who enter poverty include transitions to female headship, young adults set up their own household, and child born into household (Bane and Ellwood and Blank). Bane and Ellwood, for example, find that the percentage of poverty spells that begin with these events are 11.1 percent, 14.7 percent, and 8.6 percent, respectively (p.13-14). Contrary to the results for all individuals, shifting to a female-headed household is more often associated with poverty entry than changes in earnings for the sub-population of female-headed households with children (Bane and Ellwood p. 13-14).

Duncan and Rodgers (1988) find that the labor supply of individuals in the household other than the mother or father is the event that coincides most with children's transitions into poverty. Fewer work hours of the male head, as well as unemployment of the male head, also coincides with poverty entries of children. Shifting into a single-parent family and having a head who becomes disabled are somewhat less important than these labor supply measures.

Poverty Exits

Similar to events associated with poverty entry, descriptive analyses using both the SIPP and PSID find that changes in labor supply and earnings are more commonly associated with poverty exits than changes in household structure and composition. Using the SIPP, Ruggles and Williams (1987) find that almost 47 percent of those leaving poverty had a family member gain a job, while the various household structure changes (including marriage) were experienced by less than one percent of those households leaving poverty. Using the PSID, Bane and Ellwood (1986) find that nearly three-quarters (73.2 percent) of poverty spells end with a rise in earnings: 50.2 percent with a rise in the head's earnings and 23.0 percent with a rise in a wife’s or other household members’ earnings. Transitions from a female-headed household to a male-headed household were experienced by 10.1 percent of individuals who exited poverty (p. 19). Examining female-headed households separately from male-headed households, Bane and Ellwood show that changes in household structure are quite important for this subset of the population, though not more important than earnings. For example, they find that 26.4 percent of female-headed households with children exit poverty when they shift to a male-headed household and 51.4 percent exit because head or others’ earnings rose (p. 19).

Again, Duncan and Rodgers (1988) find that children's transitions out of poverty most often coincide with changes in labor supply. Moving from a one-parent to a two-parent family is also associated with transitions out of poverty, although gaining a parent is more important for transitions out of poverty for blacks than nonblacks (Duncan and Rodgers). Iceland (1997b) uses a multivariate framework to examine “the effect of four structural characteristics on individual poverty exits: (1) economic restructuring, (2) skills mismatches, (3) racial residential segregation, and (4) welfare benefit levels. Results show that these factors play a role in explaining African-Americans’ economic disadvantages, but they have a weaker and often contrary impact on whites’ poverty exit” (p. 429).

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