IN AND OUT OF LOW INCOME

Analysis of the Longitudinal Administrative Databank (LAD) data shows that the longer a person is able to stay above the LIM threshold, the smaller their chances of experiencing a subsequent low income spell. In 1993, the likelihood of falling below the threshold again averaged 19% after one year above the LIM, and dropped to only 6% after four years. But the chances of slipping back into low income vary considerably with family status and gender. For men in husband-wife families with two incomes and two children, the probability of re-entering a low income spell was 9% after one year above the LIM, and only 3% if they managed to stay above it for four years. In contrast, for a divorced woman living with two children, the likelihood of re-entering a low income spell was 31% after one year above the threshold, and 12% after four years. Calculating multiple spells of low income... The persistence of low income would be significantly under-estimated if the existence of multiple spells of low income were ignored. Estimates for multiple spells combine the probability of both exit and re-entry in a single function. The calculation also controls for unobserved personal characteristics such as education and ability, which vary from person to person and can affect the duration and frequency of low income spells. The estimation technique for multiple spells produces four categories of individuals with separate probability profiles: high exit/high re-entry, high exit/low re-entry, low exit/low re-entry, and low exit/high re- entry. Chances of ending low income spell fade with time in the United States Researchers in the United States have been among the first to model the dynamics of low income with a duration analysis approach. A 1986 study(f.1) compared individuals just entering a low income spell with those who currently have low income; it found that the majority of people who fall below the low income threshold will be poor for a relatively short period of time, but the majority of people who are currently poor are in the midst of a long spell of low income. A 1995 update of this study(f.2) examined the frequency of multiple spells of poverty and extended the time period of the study. The results showed that, over time, the chances of ending a low income spell declined, especially for someone living in a female-headed household. Moreover, over half of the people who ended a low income spell would experience another spell within five years.