Low income dynamics among ethnic minorities in the UK

Summary

We investigate low income dynamics among ethnic minorities in the UK, whilst simultaneously controlling for initial conditions and non-random attrition. Using a first order Markov model developed by (Cappellari and Jenkins, 2004) we use data from Understanding Society, a large representative longitudinal household survey comprising an ethnic minority boost sample to analyse the differences in poverty persistence between and within the main ethnic groups in the UK. Results suggest that ignoring the presence of initial conditions and/or non-random attrition overestimates the magnitude of poverty persistence, particularly for Pakistani and black African groups. Indeed, with the exception of the black Caribbean group, the hypothesis that conditional poverty status, initial poverty status and non-random attrition are uncorrelated is strongly rejected. Results suggest that one cannot reject the absence of genuine state dependence i.e. scarring effects for the Pakistani, Bangladeshi and black Caribbean groups. Stylised examples for individuals with particular characteristics highlight that differences in poverty persistence, poverty entry and duration in poverty or non-poverty arise not only between, but also within members of the same group, highlighting significant within group heterogeneity.