Poverty trajectories after risky life events in Germany, Spain, Denmark and the United Kingdom: a latent class approach Leen Vandecasteele Post-doctoral research fellow Sociology - Cathie Marsh Centre for Census and Survey Research University of Manchester

Research aims 1. Exploration of poverty trajectories after experiencing a risky life event like partnership dissolution, job loss and leaving the parental home 2. Investigate typologies in terms of social class, education level and gender of household head

Life events and poverty Biographisation of poverty: poverty is associated with particular events and stages in the lifecourse, breaks in the standard life course Study of life course events leading to poverty Demographic events: partnership dissolution, birth of child, leaving the parental home, widowhood Labour related events: retirement, transition to unemployment In this study focus on three events: partnership dissolution, job loss, leaving parental home

Poverty entry risk after risky life events: mainly studied through the regression approach Less suitable for gaining insight in longer-term effects of life events Latent class analysis: a more complete picture of the poverty dynamics following risky life events Longer term picture differentiation according to the duration of poverty Alternative poverty patterns overlooked by regression analysis Research motivation

Latent class analysis Determines latent clusters in the data on the basis of categorical indicators Aim: descriptive method to explore poverty patterns after life events Possibilities Likelihood of poverty entry after risky life event Length of poverty spell after life event Find undetected patterns

Poverty in a longitudinal perspective Different ways of looking at income poverty over time Count number of years in poverty Does not account for recurrence of poverty and length of any specific spell Average income over a specific time period Persistence of poverty problem Arguably whether people can really smooth out income over time Typologies taking into account length, stability, recurrence (eg Muffels, Fouarge, Dekker, 2000) Never poor - transient poor - recurrent poor - long-term poor This paper: exploratory, descriptive data-driven way However, certain expectations on basis of literature

Expectations concerning poverty trajectories after risky life events The majority of poverty spells in Europe is short-term and recurring (Fouarge & Layte, 2003) H1. poverty spells experienced after partnership dissolution, job loss & leaving the parental home will more often be short-term than persistent

Expectations concerning poverty trajectories after job loss Different welfare regimes protect their inhabitants against the negative effect of job loss to differing degrees H3. It is expected that higher rates of persistent poverty will occur after job loss in Spain and the United Kingdom than in Denmark. Late poverty effects? H4. Especially in Denmark and Germany, with their more protective welfare state, we can expect to find a postponed poverty effect of job loss Occurring after the initial period of high income protection provided by the welfare state has passed

Expectations concerning poverty trajectories after leaving the parental home Differences between countries in age when leaving the parental home Southern Europe: late Differences in importance of financial security on decision of leaving home (Aasve et al., 2002) Southern Europe: very important Scandinavian countries: least important H5. The poverty entry risk after leaving the parental home is expected to be smallest in Spain and largest in Denmark.

Expectation concerning the effect of social stratification determinants on poverty trajectories Individualisation of poverty (Leisering and Leibfried, 1999) Poverty risk transcends social boundaries Mainly believed to be valid for temporary poverty occurring as a break in the life-course Social classes are believed to be mainly predictors of longer-term wealth and income (Hauser and Warren, 1997; Sorensen, 2000) H6. Short-term poverty after experiencing one of the risky life events is expected to be less structured by social stratification determinants, compared to longer-term poverty

Overall: expected poverty patterns after risky life events No poverty consequence Short-term poverty Longer term poverty Late poverty entry

Research method European Community Household Panel Socio-economic panel study: Countries under study: Denmark, Germany, Spain, United Kingdom 13 country pooled dataset for poverty entry after partnership dissolution Latent class analysis: Latent classes are unobservable (latent) subgroups or segments Technique initially developed for categorical data Probability based classification ~ loglinear models Based on vectors with observed outcomes Hypothesize a number of latent classes Estimate conditional probability of obtaining the observed vector given membership of a given class ! Outcome is a categorical latent variable

Research method Selected population All persons experiencing partnership dissolution, job loss or leaving the parental home within the time frame of the ECHP panel Not poor in year before risky life event Time frame Poverty trajectories during five years after risky life event Right censoring? A complete 5-year follow-up was not achieved for all Attrition, end of panel study Missing values and censored cases included in the Likelihood estimation Missing values can be considered MAR (Missing At Random)

Research method Poverty Income poverty < 60% of the equivalized median household income in a given year and country Poverty measure time lag adjusted Household income measure in ECHP dataset refers to previous calendar year Problematic in panel data research with time-varying covariates Recalculation of current year household income - matched to current year household composition (See: Debels & Vandecasteele, 2008) Weighted Nonresponse Design effects - country population size

Results Four main latent classes can be discerned Persistent non-poor Group with transient poverty risk Group with longer-term poverty risk Late poverty entrants Not all poverty patterns have the same prevalence in all countries under study

Conditional probabilities of being poor in the years after partnership dissolution

Poverty trajectories after partnership dissolution: latent class sizes Transient poverty risk is more likely than longer-term or late poverty entry risk after partnership dissolution

Poverty trajectories after job loss Separate country analyses suggest partly same latent classes in the four countries Multigroup latent class analysis Check whether the latent classes are statistically equivalent in the four countries Model allows for partial measurement invariance

Conditional probability of being poor in the years after job loss

Poverty trajectories after job loss: country differences Latent class sizes of poverty patterns after job loss Partial measurement invariance Only three latent classes in Denmark and Spain

Poverty trajectories after leaving the parental home: country differences Partial measurement invariance No longer-term poverty risk in Spain and Germany Late poverty entry risk: only in Spain, small

Summary poverty trajectories Mainly 4 latent classes Persistent non-poor: largest group Transient poverty: largest poverty outcome after partnership dissolution and leaving the parental home Longer-term poverty risk Late poverty entry

Social stratification determinants of the different poverty trajectories Inclusion of covariates in latent class solutions Active covariates for partnership dissolution Inactive covariates for job loss and leaving parental home Gender household head yr 1 after event Education level household head yr 1 after event Social class

Social stratification determinants of the different poverty trajectories General pattern: Higher chance of being at transient and longer-term poverty risk after risky life event: Female household head Lower educated household head Long-term unemployed/inactive Social class: routine non-manual Difficult to characterize late poverty entrants in terms of these variables

Social stratification determinants of the different poverty trajectories Is the short-term poverty pattern less structured by social stratification determinants, compared to longer-term poverty? Limited evidence in data

Who are the late poverty entrants? Group of late poverty entrants most pronounced after job loss in Denmark Who are they? Limited evidence from typology on the basis of gender, social class and education level Could be power problem - relatively small N Static covariates - Social class, gender, education level at year 1 Future research - characterize late poverty entrants in terms of trajectory variables : Employment trajectory after life event Effect of experiencing a second life event

Further research illustration DK: employment trajectories in 5 years after job loss 40% remained unemployed 38% went back to work and remained employed 22% went back to work and experienced another job loss ? Late poverty effect after job loss in DK: to what extent matter of: Fast re-employment chances and recurrent unemployment Long-term unemployed with postponed poverty entry

Conclusion Exploration of longitudinal poverty patterns in first five years after partnership dissolution, job loss and leaving the parental home Four main latent classes Persistent non-poor People with transient poverty risk People with longer-term poverty risk Late poverty entrants

Conclusion Differences between countries According to welfare regime & moving out of house patterns Group of late poverty entrants Most pronounced after job loss and in Denmark Latent class methodology sheds new light on welfare regime differences in the poverty risk Social stratification: Clear gender, educational and social class inequalities in both the short-term and longer-term poverty risk associated with life events More difficult to characterize late poverty entrants on basis of gender, education, social class

Thank you for your attention! Paper on QMSS website Comments welcome! Leen Vandecasteele University of Manchester Sociology - Cathie Marsh Centre for Census and Survey Research