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This chapter is about the changes in people’s incomes from one year to the next in Britain. It aims to establish salient facts about income dynamics in general and poverty dynamics in particular, and their socio-economic correlates, drawing on new evidence for the 1990s derived from the British Household Panel Survey.

A household’s income level is strongly associated with two main characteristics: the composition of the family and the employment of its members. So this chapter follows logically from previous contributions to this book, especially Chapters Two and Four. As will be shown later in this chapter, movements in and out of poverty are related to both demographic and economic changes.

The pattern of income changes from one year to the next is one of much mobility, but most of the changes are short-range. For example, of those who are poor in one year, almost one half are not poor the following year – but those who escape poverty often remain on low incomes and have a high risk of returning to poverty in future years. Income mobility also means that the proportion of the population that is touched by poverty over a six-year period is twice as large as the proportion that is poor in any one year.

Income and poverty dynamics have intrinsic social relevance and policy significance. The extent of mobility and poverty persistence are important social indicators to be placed alongside information about the income distribution at a point in time. For example, the former Secretary of State for Social Security Peter Lilley discounted the rising incidence of low income during the 1980s with reference to new evidence about

income mobility:

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