1984 to 1985

1985 to 1986

1987 to 1988

1990 to 1991

1991 to 1992*

1992 to 1993

1993 to 1994

Figure 1.

Year-to-Year Changes in Income-to-Poverty

Ratio of Persons

(Percent distribution)

* Revised.

Note: Longitudinal data are not available for 1986-87,

1988-89, and 1989-90.

Source: U.S. Bureau of the Census, Survey of Income and

Program Participation.

Declined 5 percent or more

Changed less than 5 percent

Increased 5 percent or more

33.6

24.1

42.3

30.3

22.6

47.1

32.3

23.5

44.2

40.3

23.4

36.3

37.9

22.4

39.7

39.4

21.9

38.7

36.8

22.7

40.5

U.S. Department of Commerce Economics and Statistics Administration

Dynamics of Economic Well-Being:

Income, 1993 to 1994

Moving Up and Down

the Income Ladder

By Wilfred T. Masumura

C E N S U S B U R E A U P70-65

Issued July 1998

Current Population Reports

Household Economic Studies

Introduction

From year to year, the economic

well–being of many Americans

changes considerably, even

though summary measures, such

as median income, do not vary

much in real terms from one year

to the next.

One measure of economic well–

being is the income–to–poverty

ratio—called the income ratio

here—that is, the ratio of an individual’s annual family income to

the family’s poverty threshold.1

Between 1993 and 1994, roughly

three–fourths of the population

saw their economic well–being

fluctuate by 5 percent or more. As

the data in Figure 1 show, this degree of fluctuation has been fairly

constant over the past 10 years.

Conversely, from year to year,

fewer than a quarter of all Americans had stable income ratios

(that is, ratios that changed less

than 5 percent from year to year).

Over the course of a lifetime, the

average American can expect to

experience a number of such

shifts in economic well–being.

Incomes rose less often in

the 1990s than in the 1980s.

Figure 1 depicts, for seven 2 year

periods beginning in 1984, the frequency with which income ratios

rose or dropped (5 percent or

more) or remained about the

1The income ratio standardizes economic

well-being through the use of poverty

thresholds. A poverty threshold is an

amount of annual family income below

which a family is deemed to be in poverty.

Poverty thresholds vary by family size and

composition and are updated each year to

adjust for inflation. For instance, in 1994,

the poverty threshold for a three-person

family was $11,817. Hence, for a family of

three with an income of $20,000 that year,

the income-to-poverty ratio, or income ratio, would be 1.69 (i.e., $20,000/$11,817).

Poverty thresholds are also calculated for

unrelated individuals, such as one-person

households. 

same (moved less than 5 percent)

from one year to the next. Based

on those periods, the percentage

of people whose income ratios

grew from year to year was smaller in the 1990s than in the 1980s,

reaching its minimum during the

1990-91 recession. Conversely,

the proportion of people who experienced declines in their income

ratios from one year to the next is

larger in the present decade than

in the last. In the 1993-94 period,

as in the other pairs of 1990s

years, the difference between the

proportion of income ratio drops

and the proportion of income ratio

increases was no greater than

four percentage points.

Variations in personal and

family circumstances can

affect economic well–being.

The state of the economy is a notable factor in determining which

way income fluctuations go, but it

is not the only factor. Changes in

individual circumstances also are
2 P70-65

U.S. Census Bureau, the Official Statistics July 23, 1998 TM

salient factors affecting economic

well–being. Table 1 shows that

people had a good chance of having their income ratios rise (5 percent or more) from one year to the

next if:

 They began to work full–time,

year–round (62 percent)

 The number of workers in their

household increased (70 percent)

 They married (65 percent) or

became part of a marriedcouple family (74 percent)

 The number of adults in their

household went up (65 percent)

or the number of children

dropped (59 percent)

Conversely, most people saw their

income ratios decline significantly

when they ceased to:

 Be married (61 percent); or

 Work full-time year-round (59

percent)

Table 1.

Change in Their Income-to-Poverty Ratios of People by Selected Characteristics: 1993 to 1994

 Declined Changed Increased 

Total 5 percent less than 5 percent

Characteristic (thousands) or more 5 percent or more

All persons 246,156 36.8 22.7 40.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

WORK EXPERIENCE (Persons 18 and over)

Year-round, full-time in 1993 to 

not year-round, full-time in 1994 8,519 59.4 14.5 26.2 . . . . . . . . . . . . . . . . . . . . . . . . . 

Not year-round, full-time in 1993 to 

year-round, full-time in 1994 11,493 24.3 13.4 62.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

NUMBER OF WORKERS IN HOUSEHOLD

Fewer workers in 1994 than 1993 25,418 69.1 10.3 20.6 . . . . . . . . . . . . . . . . . . . . . . . 

More workers in 1994 than 1993 27,843 20.1 9.7 70.2 . . . . . . . . . . . . . . . . . . . . . . . . . 

MARITAL STATUS (Persons 18 and over)

From married in 1993 to other in 1994 2,287 61.0 7.7 31.3 . . . . . . . . . . . . . . . . . . . 

From other marital status in 1993 to married in 1994 3,497 25.6 9.3 65.1 . 

FAMILY STATUS

From married-couple family in 1993 to 

other family type in 1994 3,273 69.7 6.4 23.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

From other family type in 1993 to 

married-couple family in 1994 2,449 20.9 4.9 74.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

HOUSEHOLD COMPOSITION

No change in number of adults:

Fewer children in 1994 than 1993 4,476 29.2 11.6 59.2 . . . . . . . . . . . . . . . . . . . . . . . 

More children in 1994 than 1993 10,464 64.8 12.9 22.2 . . . . . . . . . . . . . . . . . . . . . . . 

No change in number of children:

Fewer adults in 1994 than 1993 12,310 59.3 11.3 29.5 . . . . . . . . . . . . . . . . . . . . . . . . 

More adults in 1994 than 1993 7,712 22.3 12.6 65.1 . . . . . . . . . . . . . . . . . . . . . . . . . . 

INCOME-TO-POVERTY RATIO IN 1993

Less than 1.00 31,840 26.1 21.2 52.7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

1.00 to 1.99 49,137 33.7 20.7 45.6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

2.00 to 3.99 89,111 35.7 22.9 41.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

4.00 or more 76,067 44.5 24.3 31.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

GENDER

Women 126,632 37.0 23.2 39.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Men 119,523 36.6 22.1 41.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

RACE AND HISPANIC ORIGIN

White, not Hispanic 184,163 36.8 23.1 40.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

African-American 31,316 37.1 22.0 40.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Hispanic1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,950 34.7 20.7 44.7

AGE (in 1993)

Under 18 years 65,394 35.5 20.5 44.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

18 to 24 years 23,694 38.5 16.6 44.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

25 to 44 years 80,850 36.5 20.9 42.7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

45 to 64 years 48,743 38.7 23.0 38.4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

65 years and over 27,474 36.0 37.8 26.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

1Persons of Hispanic origin may be of any race.

Source: U.S. Bureau of the Census, Survey of Income and Program Participation.
P70-65 3

U.S. Census Bureau, the Official Statistics July 23, 1998 TM

Furthermore, where one stands

on the income ladder correlates

with the likelihood of improving or

reducing his/her economic wellbeing. The lower one’s current

income ratio is, the more likely it

will rise the following year, and the

less likely it will fall. For instance,

Table 1 shows that among those

whose 1993 income ratios were

less than 1.00 (i.e., people in poverty), 53 percent saw their income

ratios rise the following year, while

just 26 percent experienced declines. On the other hand, among

those at the top of the ladder

(people with income ratios of 4.00

or more), 45 percent experienced

decreases in 1994, while only 31

percent posted gains.

Age, gender, race, and

ethnicity make little

difference in the likelihood

of income gains and losses.

While there are considerable disparities in income distribution by

gender, race, and Hispanic origin,

Table 1 indicates that differences

in these characteristics are not

good predictors of whether one’s

economic well-being next year will

be better or worse. With regard to

these variables, the 1993–94 findings are similar to findings for previous pairs of years in the present

decade.

During the 1990s, year-to-year

changes in income ratios among

women and men closely

resembled one another, with differences never being greater than 2

percentage points. As indicated in

Table 1, a slightly larger proportion

of women experienced income

gains from 1993 to 1994, but this

was not the case for previous

years in the decade.

Also, in the first year of the present decade (including 1993-94),

differences in year-to-year income

ratio changes for White and African-Americans never exceeded 5

percentage points (for any specific

pair of years). Table 1 shows that

Hispanics had a slight (statistically

significant) edge, compared with

non-Hispanics, in income increases for 1993-94; but this was

not so for previous years in the

decade.

As Table 1 demonstrates, among

the various age cohorts, the only

large difference in income

changes occurred between the elderly (those 65 years of age and

over), on the one hand, and those

in the younger age brackets, on

the other. As was the case for

previous years, the elderly had the

highest proportion experiencing

little or no change in income and

also the lowest percentage with

income gains from one year to the

next.

Shifts in income sources

affect economic well–being.

Table 2 shows that the mere appearance or disappearance of a

particular income source is often

an indicator of improvement or

decline in economic well–being

from one year to the next.

As would be expected, the likelihood of income ratios increasing

was much greater when someone

in the family began bringing in

earnings. Conversely, an income

decline was much more probable

when a family ceased to have

anyone with earnings.

Receipt of unemployment benefits

sometimes occurs when one’s

earnings disappear. Hence, income drops were more likely for a

year when people start getting unemployment checks; and, vice

versa, income gains occurred

more frequently during a year

when people stop getting unemployment compensation.

Loss of retirement and disability

benefits, such as pensions, often

hurts people’s economic well-being. Those who had lost such

benefits (during the year) were

more likely to experience income

ratio reductions than individuals in

families which began receiving

such benefits (during a particular

year).

Means–tested benefits are designed to aid families with the

lowest incomes. Thus, income

losses are expected to occur more

often in those years when people

begin getting such benefits. Such

was indeed the case for means–

tested benefits in general and for

food stamps and medicaid in particular.

For more information:

Income trends—

Wilfred Masumura

301-457-3243

Survey design—

Karen King

301-457-4192

Source and Accuracy 

of Estimates

This report is one of a series that

presents information of current

policy interest. All statistics are

subject to sampling variability, as

well as survey design flaws, respondent classification errors, and

data processing mistakes. The

Census Bureau has taken steps to

minimize errors, and analytic

statements have been tested and

meet statistical standards. However, because of methodological

differences, use caution when

comparing these data with data

from other sources. For information on the source of data and the

accuracy of estimates, including

the use and computation of standard errors, see the “Source and

Accuracy Statement for the 1993

SIPP Longitudinal Panel File.”

See also the SIPP web site:

http://www.sipp.census.gov/sipp/
4 P70-65

U.S. Census Bureau, the Official Statistics July 23, 1998 TM

Table 2.

Change in Income-to-Poverty Ratios of People by Selected Sources of

Family Income: 1993 to 1994

Declined Changed Increased 

Total 5 percent less than 5 percent

Source of income (thousands) or more 5 percent or more

EARNINGS

Earnings in 1994 but not 1993 3,956 16.4 10.3 73.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Earnings in 1993 but not 1994 5,221 76.5 9.6 13.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

ASSET INCOME

Income from assets in 1994 but not 1993 9,513 26.8 13.3 59.9 . . . . . . . . . . . . . . . 

Income from assets in 1993 but not 1994 11,563 48.4 14.6 37.0 . . . . . . . . . . . . . . 

UNEMPLOYMENT COMPENSATION OR BENEFITS

Benefits in 1994 but not 1993 10,349 48.5 14.0 37.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Benefits in 1993 but not 1994 17,330 36.3 11.2 52.4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

PENSION AND PRIVATE DISABILITY INCOME1

Benefits in 1994 but not 1993 8,718 40.1 14.5 45.4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Benefits in 1993 but not 1994 7,677 51.2 13.7 35.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

SOCIAL SECURITY (AND RAILROAD RETIREMENT)

Benefits in 1994 but not 1993 5,405 39.9 12.1 48.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Benefits in 1993 but not 1994 3,139 54.0 8.9 37.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

MEDICAID

Covered in 1994 but not 1993 8,666 49.2 15.4 35.4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Covered in 1993 but not 1994 7,914 32.0 13.4 54.6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

AID TO FAMILIES WITH DEPENDENT CHILDREN

(AFDC) AND GENERAL ASSISTANCE

Aid in 1994 but not 1993 3,553 47.7 8.2 44.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Aid in 1993 but not 1994 3,846 32.0 8.2 59.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

SUPPLEMENTAL SECURITY INCOME (SSI)

Aid in 1994 but not 1993 2,507 36.0 6.7 57.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Aid in 1993 but not 1994 2,046 52.4 6.8 40.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

FOOD STAMPS

Stamps in 1994 but not 1993 4,871 57.9 11.9 30.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Stamps in 1993 but not 1994 5,911 26.9 10.3 62.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

MEAN-TESTED BENEFITS2

Benefits in 1994 but not 1993 9,260 47.9 19.1 33.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Benefits in 1993 but not 1994 9,356 34.3 12.5 53.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

1Pension and private disability income includes: retirement and life insurance payments, pensions, annuities, and compensation 

for death, disability, and illness. Not included are Social Security, Railroad Retirement, and Supplemental Security Income (SSI).

2Means-tested benefits include: Aid to Families With Dependent Children (AFDC), General Assistance, Supplemental Security

Income (SSI), Medicaid, food stamps, and Federal or State rent assistance.

Source: U.S. Bureau of the Census, Survey of Income and Program Participation.