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Working Paper Number SEHSD-WP1989-18 or SIPP-WP-86
P. Ruggles and R. Williams
Component ID: #ti525134449

Most studies of the incidence and duration of poverty rely on annual income data, which are compared to a set of poverty thresholds adjusted for family size and composition to determine whether or not a given family is in poverty official U.S. poverty statistics on the percentage of the population in poverty, for example, are computed by the Bureau of the Census using data on annual incomes as reported in the Current Population Survey (U.S. Bureau of the Census 1987). Similarly, the well-known article by Mary Jo Bane and David Ellwood on the duration of poverty spells (Bane and Ellwood 1986) uses annual income data from the University of Michigan's Panel Study of Income Dynamics. Indeed, until recently only annual income data were available on a regular basis for a large-scale, representative sample of the U.S. population.

With the advent of the Survey of Income and Program Participation (SIPP), however, longitudinal monthly data or, personal and family incomes over a period of 32 months are now available for an initial sample of more than 60,000 persons. Examination of these data have already made it clear that there is an enormous amount of fluctuation in incomes within the annual period, particularly for the low income population (Ruggles 1988a). Because the SIPP data are longitudinal, they allow a variety of options for measuring poverty over different periods of time, and because income fluctuations are so common for the low income population, these alternative poverty measures can be strikingly different. For example, for the population as a whole the 1984 poverty rate based on annual income as measured in the SIPP is about 11 percent. However, only about 5 percent of the population were poor in every month--that is, were in a family every month that had a monthly income that was below one-twelfth of the appropriate annual poverty threshold. In contrast, a relatively large proportion of the population-over 26 percent-had at least one month in 1984 when they were in a family with an income below the monthly poverty threshold (Williams 1986; Ruggles and Williams 1986.)

As these figures imply, a large number of people who are not poor on the basis of their annual incomes do experience subannual spells of poverty. The incidence of these short-term spells may be of substantial interest for several policy-related purposes. For example, most means-tested assistance programs such as Aid to Families with Dependent Children (AFDC) and the Food Stamp Program (FSP) calculate eligibility on the basis of monthly rather than annual incomes, and these data imply that many more people may be eligible for such programs than would be estimated using annual income data alone. In addition, to the extent that such sub-annual poverty spells are experienced by families and individuals who typically have near-poverty incomes and thus have limited savings or other resources, even relatively short spells of very low income may represent substantial hardships.

This paper expands upon our earlier research on poverty-related issues in the SIPP, which primarily focused on alternative poverty measures within an annual period. For this study, we have focused instead on estimating a distribution of the total duration of poverty spells, using a complete 32 month research file constructed from the 1984 panel of the SIPP. Within this context of duration estimates, the paper also considers the impact of several different poverty definitions. The final section of the paper comments on the implications of our findings relative to those derived from more conventional cross-sectional poverty measures, or even from longitudinal data using an annual accounting period. Before turning to a discussion of our results, however, a brief description of our data and of the methods we have used to calculate spell durations is appropriate.

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