In or out? Poverty dynamics amongst pensioner households in the UK

Publication type

Conference Paper


Understanding Society Scientific Conference 2015, 21-23 July 2015, University of Essex, Colchester, UK


Publication date

July 21, 2015


Individuals in the UK are living longer: The 2011 Census highlighted
one in six individuals in the UK is aged over 65, however relatively
little is known about the income dynamics of this group. Rising
longevity is not a problem assuming (1) The number of healthy life years
lived also increases and (2) Individuals are not in poverty. The focus
of this paper is to investigate the latter. We use a first order Markov
model to test for correlation between initial and conditional poverty
status in Waves 2-4 of Understanding Society. We explicitly control for
the fact that survey response differs, for example due to differences in
health which may have implications for our results. The results suggest
individuals who are initially poor are no more or less likely to remain
poor than the initially non-poor. The model estimate indicates no
evidence of a correlation between initial and conditional poverty status
with survey retention. These results imply that future research
investigating low income dynamics in pensioner households can be
accomplished using relatively simple and well established methods.
Using the model estimates it is possible to demonstrate how
differences in individual and household characteristics can heavily
influence particular aspects of the poverty experience such as the time
spent in poverty, the time spent out of poverty and probability of
entering poverty. This provides a useful tool to policymakers in
understanding how the introduction of particular policy might affect the
poverty experience. The model also allows us to test whether there are
scarring effects from experiencing poverty; we find no evidence of such
effects. However we do find evidence of state dependence, that is to
say the extent to which current poverty depends on past poverty is large
(around 93%), with only the remaining 7% attributable to differences in
individuals. This result is striking, the fact that an individual was
poor last year largely determines their chances of being poor this year.
The size of this effect highlights the need for policies which prevent
pensioner households from falling into poverty.





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