Transition Events in the Dynamics of Poverty. What events increase individuals' likelihood of entering and exiting poverty?

09/01/2002

Many events throw people into poverty and many events help people exit from poverty. There appears to be no single path into or out of poverty. We find that household events—including changes in composition, employment, and disability status—are important, as well as economic conditions. These findings suggest that multiple policies can be considered to help alleviate poverty.

Descriptive statistics suggest that those who shift from a two-adult household to a female-headed household and vice versa are the most likely to transition in and out of poverty, although individuals experiencing all of these trigger events are more likely to enter and exit poverty than those not experiencing the events. While the multivariate results confirm that many events affect individuals’ likelihood of entering and exiting poverty, a different event is identified as most important in poverty transitions. Individuals living in a household that experience a loss or gain of employment are the most likely to enter and exit poverty, followed by individuals in households that shift from being headed by two adults to being headed by only a female, and vice versa. Controlling for household characteristics and other variables reduces the observed relationship between household structure shifts and poverty, and employment changes emerge as being most strongly related to poverty entries. Our findings also suggest that many of the household, geographic, and economic characteristics are significantly related to poverty entries, as well as the poverty and non-poverty spell information.

Consistent with the findings from the total sample, changes in employment are also identified as most important in individuals' entries into and exits from long and short poverty spells. We do, however, find some differences across the two groups. For example, we find that a spouse’s employment loss is related to entries into short poverty spells, but not long poverty spells. And, that employment gains of other household members are more important for exiting a long versus short poverty spell.

A comparison of the 1988/1990 and 1996 SIPP panel results shows many similarities, but one substantial difference. Over the 1988-92 (i.e., 1988/1990 SIPP panel) to 1997-99 (i.e., 1996 SIPP panel) time period, shifts from two-adult to female-headed households and vice versa—measured while controlling for shifts in employment—became less important in individuals' poverty transitions. Further analysis suggests that one possible explanation for this pattern is that in the latter period changes in household structure are operating through employment to a greater extent than in the earlier period.

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