Community Research and Development Information Service - CORDIS


CHANGEQUAL: Economic Change, Unequal Life Chances and Quality of Life.

Project ID: HPSE-CT-2002-50028


It is now widely appreciated - at least among researchers - that simply observing individuals or households to be on low income at a point in time is seriously inadequate as a measure of their economic status, and can mislead as to the nature and causes of long-term disadvantage. The way income evolves over time, the dynamics of income from one period to the next, the relationship between income observed at a point and longer-term or �permanent� income have come to be seen as critically important. While the distinction between permanent and transitory income has been employed in economics for half a century, it is only with the availability of longitudinal data from panel surveys and administrative sources that income dynamics have been studied empirically on a broad front. Research on the dynamics of low incomes form an important but underdeveloped sub-set of this broader literature.
The first question a focus on dynamics highlights is whether those identified as low paid or below an income poverty threshold at a point in time are in that situation persistently, move in and out of low pay/poverty, or are in that state only for a short period and then escape entirely. It is easy to see why this matters so much. Suppose that the low pay or poverty rate is stable at 10% each year over a ten-year period. This could represent the same one-tenth trapped in low pay/poverty for the whole decade, or at the other end of the spectrum everyone experiences low pay or poverty but for no more than one year. The nature of the phenomena and their consequences for the welfare of those affected would surely be very different.

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