COVID-aid programs helped to cut childhood poverty by 46%, new census report shows

The number of children in poverty fell by 46% in 2021 compared to the previous year, but poverty among people 65 and older rose 13%, according to a new census report.

The U.S. Census Bureau’s newly released data on national rates of poverty, income and health insurance offers a glimpse into the economy of Americans coping with the effects of the COVID-19 pandemic and the impact of president Joe Biden’s $1.8 trillion American Rescue Plan to counter the economic slowdown, high unemployment and inflation.

On Tuesday, census officials said that federal COVID-related refundable tax credits and stimulus payments were major contributors to reducing the number of children in poverty in 2021.

The 5.2% child poverty rate in 2021 is considered the lowest on record supplemental poverty measure, which takes into account government programs for low-income families that aren’t included in the official poverty measure and cost-of-living adjustments.

“In 2021, child poverty fell to a historic low. In the past two years, the United States made more progress in reducing child poverty than ever before as a result of smart, evidence-based public policies,” said H. Luke Shaefer, faculty director of the University of Michigan’s Poverty Solutions, an initiative that aims to prevent and alleviate poverty through action-based research. “However, child poverty is on track to increase in 2022 because many COVID-era anti-poverty policies have been eliminated, especially the expanded child tax credit.”

Shaefer said this policy’s success is fleeting since this federal assistance wasn’t extended nor replaced with another form of governmental intervention.

“So we can expect next year to see big increases in child poverty,” he said.

The overall SPM rate was 7.8% in 2021, in comparison with 9.2% in 2020, a general reduction of 15%, according to the census data. All group ages experienced poverty reduction rates, except 65 years and older.

Cullum Clark, director of the Bush Institute-SMU Economic Growth Initiative, said credit for the decrease in poverty can’t go to COVID-relief programs and tax credits alone. People reentering the workforce in 2021 is the most significant contribution that explains this trend.

“My supposition right now is that the very fact of 11 million people or something going from not working to working sort of trumps all the other factors,” Clark said.

The SPM rate numbers do not replace the official poverty rate, which in 2021 was 11.6% or 37.9 million people in poverty. The census officials said this number wasn’t statistically different from 2020.

Income inequality grew

The median household income was $70,800 in 2021, only slightly lower than the 2020 estimate of $71,200. Clark said the difference itself isn’t remarkable.

However, Tuesday’s report also showed a 4.1% decrease in the median income of full-time workers during 2021 accounting for inflation.

Record-level unemployment during the early COVID-19 crisis resulted in less a decrease of income from a job, although households were supplemented by stimulus checks and unemployment insurance. As people returned to work in large numbers in 2021, household incomes grew.

“That’s an enormous decline,” Clark said. “So the net result was that people who worked all of 2020 and 2021 had considerably less spending power than they had the year before,” Clark added.

Among the findings:

• Broken down by race and ethnic background, Asian households in 2021 had the highest median income at $101,418, followed by non-Hispanic whites at $77,999 and Hispanics at $57,981. Black households had a median income of $48,297. Clark said most of the gaps in income based on race can be explained by education levels, however, “underlying social factors” still contribute to persistent disparities. “But what matters the most by far is that we have not succeeded as a society in bringing the educational attainment levels of historically disadvantaged groups — primarily Black and Hispanic people, also native people — up to the level of white or Asian people. That’s the tragic reality of America today,” Clark said.
• Income inequality increased by 1.2% between 2020 and 2021, which represents the first time the Gini index has shown an annual increase since 2011. The Gini index is a standard adopted for most countries to measure income inequality in a scale of 0 (income equality) to 1 (income inequality). Clark says one of the most striking pieces of the data released Tuesday is the disproportionate impact inflation has had on vulnerable populations, including the nation’s lowest income households and individuals 65 and older. “There was a greater than 4% decline in the real money income of people in the bottom 10% of the income distribution,” Clark said. “The poorest Americans had an outsized decline. Remember, for the average person overall, all workers’ real median income was flat. But it was down by more than 4% for the poorest 10% of the population.” Households in the 90th percentile of the income distribution, the richest, had income that was 13.5 times higher than households in the 10th percentile, the poorest. That was a 4.9% increase from 2020.
• The census report also showed that 1.1 million more people got health insurance in 2021 than in the previous year. But still, 27.2 million people did not have any coverage at any point during 2021, which represents 8.3% of the population.
• The time period in the latest Current Population Survey covered the third round of pandemic-related stimulus payments and expansions to the child tax credit, earned income tax credit and the child and dependent care credit. The time period in the survey also saw a 4.7% increase in consumer prices, the largest annual increase in the cost-of-living adjustment since 1990.