Our examination of changes in the poverty rate over the 22 years from 1975 through 1996, using PSID data, finds that the annual poverty rate was relatively low in the mid-to-late 1970s, moderate in the mid-to-late 1980s, and high in the early-to-mid 1980s and early-to-mid 1990s. The dynamics behind these changes in the poverty rate illustrate that, not surprisingly, the number of people entering poverty is greater than the number of people exiting poverty when the poverty rate is increasing and vice versa when the poverty rate is decreasing.
The number of people entering and exiting poverty remained relatively constant from 1975 until the early 1990s, when both jumped dramatically. The high levels of poverty entries and exits in the mid-1990s suggest that poverty rates remained high over this period because entries and exits were both high, not because both were low. Many people were cycling in and out of poverty. But this has not always been the case. A look at the early-to-mid 1980s, another period where poverty rates remained high, finds the number of people entering and exiting poverty comparatively low. In general, the early-to-mid 1990s look different from earlier time periods. The early-to-mid 1990s were characterized by relatively high poverty rates and high numbers of people cycling in and out of poverty.