Low Income Dynamics: Analyzing poverty exits and entries

Since 1994, the European Community Household Panel provides information on changes in the French households income and on household situation vis-à-vis the labour market month after month. Using the five available waves, this paper investigates the impact of some family events and changes in the job market situation on poverty exits and entries. The analysis focuses on working age households. Poor households are defined as those with a living standard lower than 60% of the median equivalent income. Five years poverty incidence is found to be 31%, that is twice as larger as one year incidence. One third of poor households exit from poverty in the year after while 6% of non-poor fall into. Labour income has a major contribution to changes in living standard level. An econometric estimation of poverty flows leads to the following results: Changes in employment situations have a major impact on poverty entries and exits. Probability of poverty exit increases with the number of working months while the risk of entering poverty increases when the number of working months decreases. For couples, child births increase the risk of poverty entry, but do not modify the probability of poverty exit. After a child departure the household is more likely to exit poverty, but the risk of poverty entry is not significantly affected. A high education level protects against poverty entry, but does not increase the chances of living poverty.