Transitioning In and Out of Poverty

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Abstract

Slightly more than half of the U.S. population experiences poverty at some time before age 65. Roughly half of those who get out of poverty will become poor again within five years. Who is more likely to enter poverty? How long are people poor? And what events are associated with falling into and climbing out of poverty? This fact sheet summarizes key findings from the poverty dynamics literature to describe how, why, and when people move in and out of poverty.

Summary

Understanding how, why, and when families move in and out of poverty can reveal a more complete picture of the nation’s poor than a static poverty rate provides. Exploring the trends and patterns of poverty shows who are the short-term and long-term poor, how likely people are to fall into or get out of poverty, and how long families stay poor. It can also uncover which events lead people into poverty and which ones help them escape.

• Most researchers use the official poverty definition, though many modify it. The official threshold is based on the minimum amount a family needs to buy food, multiplied by three. The most common change is comparing total household income rather than family income against the poverty threshold. This gives researchers a more accurate picture of who is poor by including the incomes of unmarried partners who live together.
• Significant numbers of people move into poverty throughout their lives. Slightly more than half (51.4 percent) of the U.S. population experiences poverty at some time before age 65 (Rank and Hirschl 1999). The chance of becoming poor is roughly 4 percent a year, but this figure does not reflect the number who cycle through poverty over the course of their lives. People are more likely to experience poverty at younger ages. About 35 percent of people are poor between age 20 and 40, compared with 23 percent who are poor between age 40 and 60 (Rank and Hirschl 2001). Also, household heads under age 25 are significantly more likely to become poor (McKernan and Ratcliffe 2002).
• The likelihood of becoming poor is higher for blacks, Hispanics, those in households headed by women, and those with lower levels of education. Poverty entry rates are about twice as high for blacks as whites—about 11 percent versus 5 percent (Burgess and Propper 1998; Ribar and Hamrick 2003). The difference between those in female-headed households with children and married-couple households with children is even larger. Single-mother households become poor at a rate of 15.7 percent a year, compared with just 2.8 percent for married-parent households (Ribar and Hamrick 2003).

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