The inconclusive debate about Fries' theory of ''natural death and the
compression of morbidity'' has diverted attention from two key issues
-the modifiability and related dynamics of functional impairment in la
te adulthood. Evidence is presented from a large (N = 11,000) panel of
adults aged initially 58-63 over the period of a decade which documen
ts substantial modification of functional status. Further, patterned c
hanges in functional status are related to the dynamics of income, his
torically a major determinant of functional status, and independently
to educational attainment. The dynamics of functional status, of incom
e, and of their relationship are explored using discrete time hazard m
odels in an event history analysis incorporating time-varying income a
nd functional status indicators. The importance of income and of educa
tion as positive, independent predictors of functional status and patt
erned changes of functional status is confirmed. The implications of t
his finding for differentiating distal (e.g. education) and proximate
(e.g. income) measures of socioeconomic status and for assessing compe
ting theories of social causation and social selection are discussed.