High poverty rates during the early 1960s and the subsequent ‘War on Poverty’ in the United States stimulated an extensive literature on the subject. In Discussion Paper No. 1362, Research Fellow Simon Burgess and Carol Propper examine some aspects of poverty using a dataset that tracks a large cohort of young Americans over a 14-year period (the National Longitudinal Survey of Youth, or NLSY). They are particularly interested in the perspective that such a long panel data set can provide on individuals’ experience of poverty.

They begin by setting out the facts on the proportion of individuals found in poverty, before examining the total years of poverty experienced by those in their sample. They then calculate transition rates into and out of poverty, and look at the lengths of poverty spells. They found that two out of five young Americans experienced at least one year of poverty. Most of these people experienced just one or two years in poverty (50% of which occurred between the ages of 18 and 22). By the age of 34, a significant group had suffered five or more years of poverty out of thirteen. The overall poverty rate of 12.9% for this sample averages these different life-cycle paths. They investigate poverty transition rates and find an average annual outflow rate of 40% and an inflow rate of 6%.

Poverty Dynamics Among Young Americans
Simon Burgess and Carol Propper