Poverty – a permanent condition or not?

According to a report released by the U.S. Census Bureau earlier this month, poverty is not necessarily a permanent condition. In the report titled Dynamics of Economic Well-Being: Poverty 2004 – 2006, researchers discovered that while 29 percent of the nation’s population was in poverty for at least two months between the start of 2004 and the end of 2006, only 3 percent were poor during the entire period.

The report follows a representative sample of U.S. residents over the 36 month period and analyzes how many of them experienced poverty and for how long. According to the report, the information collected from these residents by the Survey of Income and Program Participation (SIPP) “allows policy makers, academic research­ers, and the general public to paint a more detailed portrait of poverty than the one provided by the official annual poverty estimate.” The official annual poverty rate estimate only captures a snapshot of well-being at a single point in time.

Before we delve into some of the highlights from the report, it might be beneficial to understand the definition of poverty according to the U.S. Census Bureau:

“Following the Office of Management and Budget’s (OMB) Statistical Policy Directive 14, the Census Bureau uses a set of money income thresholds that vary by family size and composition to determine who is in poverty.  If a family’s total income is less than the family’s threshold, then that family and every individual in it is considered in poverty.  The official poverty thresholds do not vary geographically, but they are updated annually for inflation with the Consumer Price Index (CPI-U).  The official poverty definition uses money income before taxes and does not include capital gains or noncash benefits (such as public housing, Medicaid, and food stamps).”

Now that we have that understanding, let’s take a look at a few the conclusions from the report:

  • Poverty can be persistent – 33 million people were in poverty in January/ February 2004 and 23 percent remained in poverty throughout the 36 month survey period.
  • Many people did escape poverty – 12 million or 42 percent who were poor in the 2004 calendar year were not in poverty in 2006.
  • Some individuals moved out of poverty, and some moved in – about 10 million who were not in poverty in 2004 slipped into poverty in 2006.
  • For those who were in poverty for two or more consecutive months from 2004 to 2006, the median length of a poverty spell was 4.5 months. Almost half of such spells ended within four months, while about 12 percent lasted more than 24 months.
  • More than half of those who did exit poverty continued to have income that was not significantly above the poverty level (less than 150 percent of the poverty threshold).
  • Children younger than 18 tended to stay poor longer than working-age adults (ages 18-64)
    • The median length of poverty spells for those under 18 was 5.2 months.
    • For those 18 to 64, the median was 4.2 months.
    • Older adults (65 and older) had the longest stays in poverty of any age group: a median spell of 6.7 months.
  • People in female-led families had longer median poverty spells than those in married-couple families.

We find these results quite thought-provoking and are curious about our readers’ observations with regard to the number of individuals experiencing poverty, especially now that we are in 2011.