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Poverty fell overall in 2020 as result of massive stimulus checks and unemployment aid, Census Bureau says

The official rate rose slightly to 11.4%, but the agency says that after accounting for pandemic relief aid, the poverty rate fell to 9.1%. The uninsured population also rose slightly.

A December food drive in Los Angeles. (Jae C. Hong/AP)
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U.S. poverty fell overall in 2020, a surprising decline largely due to the swift and substantial federal relief that Congress enacted at the start of the pandemic to try to prevent widespread financial hardship as the nation experienced the worst economic crisis since the Great Depression.

The U.S. Census Bureau reported poverty fell to 9.1 percent in 2020 after accounting for all the government aid — the lowest rate on record and a significant decline from 11.8 percent in 2019.

Nearly 8.5 million people were lifted out of poverty last year, an unprecedented change in a single year that was largely attributed to the stimulus payments. Poverty in the United States is defined as a family of four living on less than about $26,250 a year.

“This is a really phenomenal result‚” said Elaine Waxman, a senior fellow at the Urban Institute. “But a lot of the aid that made a difference, including for families with children, won’t be extended.”

As the economy recovers from the depths of the coronavirus pandemic, White House officials are hoping that more Americans will be able to find good-paying jobs that keep them out of poverty. But deep inequalities remain, and there are troubling signs the recovery could stall. Black and Hispanic women continue to lag behind in the recovery, along with Americans without college degrees. Meanwhile, strong job gains earlier in the summer have faded as surging coronavirus cases, mostly among the unvaccinated, weigh on spending and hiring.

President Biden is urging Congress to enact more programs to help the poor and working class as part of a $3.5 trillion package that would make significant investments in many parts of the economy. Top White House aides point to the success of the pandemic aid as an example of how additional resources can make a dramatic difference in decreasing poverty and hardship. But conservatives argue that safety-net programs exacerbate worker shortages and add to already skyrocketing levels of federal debt unnecessarily.

The extensive federal relief money enacted during the coronavirus pandemic is widely credited by economists and policy experts with preventing another Great Depression. When looking at individual programs, the stimulus payments, alone, without taking into consideration expenses and other factors, would have lifted 11.7 million out of poverty, census officials estimate. And they said enhanced unemployed aid prevented 5.5 million people from falling into poverty. A separate report last week showed that, because of the aid, hunger did not rise in 2020.

“This really highlights the importance of our social safety net,” said Liana Fox, chief of the Census Bureau’s Poverty Statistics Branch.

The annual census findings also underscored the deep impact of so many job losses last year. Median income declined sharply, 2.9 percent, to $67,521, and the number of people lacking health insurance throughout 2020 grew to 28 million, nearly 2 million more than in 2019. It was the fourth year in a row that the ranks of the uninsured swelled.

Still, after accounting for the government aid, poverty declined in every age group, racial and ethnic group and educational level. Some of the largest declines in poverty were reported for families headed by single mothers, African Americans, Hispanic Americans and adults without a high school degree.

“The federal government responded quickly and significantly. And it’s very clear that those efforts prevented a sharp rise in poverty,” said James Sullivan, an economics professor at the University of Notre Dame. “The concern is that we would see poverty rise again because we’ve now seen these relief packages expire.”

Allison Mertz of Kansas City, Mo., was one of many whose standard of living drastically changed after the pandemic struck and employers slashed jobs as much of the economy shut down. Before the pandemic, Mertz worked part time so she could finish her bachelor’s degree. Her fiance planned to support them financially, but his 80-hour-a-week job in the oil industry was reduced to 20 hours. They struggled to pay rent and buy groceries and lacked money for a major car repair.

Mertz and her fiance grew up in poverty and had tried hard to climb out of it, Mertz said. They credit the stimulus payments and food assistance with preventing them from falling below the poverty line.

“Getting those stimulus checks was a game-changing moment,” Mertz said. “It just made such a big difference. It seems like such a small amount of money, but it was so much money when you have next to nothing.”

Mertz, 30, now has a full-time job in the insurance industry after finishing her bachelor’s degree, and her fiance’s hours have rebounded. They just signed the lease on a nicer apartment.

Poverty would have jumped to 12.7 percent without the stimulus payments last year, the Census Bureau said, noting that the majority of job losses were among workers earning less than $34,000 who had little to no savings. By a second measure, which leaves out much of the federal stimulus payments, poverty rose to 11.4 percent from 10.5 percent, but experts said that figure does not capture the real-world effect of the government aid.

Biden’s “Build Back Better” proposal does not include stimulus checks. But it does include extensive financial support for lower-income Americans, including universal pre-K for 3- and 4-year-olds, enhanced child-care subsidies, more subsidies to help low-income Americans buy health insurance and more tax credits for the working poor. It would also continue the expanded child tax credit that is currently providing most American families $300 a month per child under 6 and $250 a month per child ages 6 to 17. The expanded credit has the potential to cut child poverty in half, experts say.

“The whole point of the child tax credit is, if a family is working at all, it pushes the family above the poverty line so their children aren’t suffering,” said Trina Shanks, a professor of social work at the University of Michigan.

On health insurance coverage, the impact of the public health crisis was not as dire as some public policy experts had anticipated early on in the pandemic. The increase of 2 million people without health coverage throughout last year was twice as large as in 2019. Still, the 8.6 percent of U.S. residents who lacked coverage throughout 2020 was close to 2018 levels, census officials said.

The main effect on coverage was that the pandemic lowered the number of Americans with private insurance while expanding the numbers who had some form of public coverage. The proportion of Americans with job-based coverage was 54.5 percent, a full percentage-point drop from the year before. Meanwhile, the proportion covered under Medicaid increased slightly from 17.2 percent in 2019 to 17.8 percent last year.

The insurance findings also highlight long-standing disparities in insurance coverage among racial and ethnic groups that in some cases widened.

While the proportion of White residents who lacked health insurance rose slightly (from 7.8 percent in 2019 to 8.3 percent last year), a far larger share of Hispanics were uninsured — 18.3 percent in 2020, compared with 16.7 percent the previous year. Among Blacks, the uninsured rate increased to 10.4 percent last year, up from 9.6 percent in 2019. People living below the poverty line were far less likely to have health coverage, with fully one-quarter of the poor without any insurance last year.

The census data shows that the rate of uninsured was especially high in a dozen states that have chosen not to expand Medicaid eligibility under the Affordable Care Act — nearly double the rest of the country. Unlike his predecessor, Biden has been pressing to expand Medicaid in the dozen holdout states, and Congressional Democrats are considering proposals that would allow people frozen out of the program by their state governments to buy private ACA health plans inexpensively.

The insurance trends highlight an emerging pattern in which “the government’s role is just growing every year,” said Dan Mendelson, chief executive of Morgan Health, a company focused on health-care innovation in employer markets.

Beyond the pandemic, the findings demonstrate how employer-sponsored insurance is shrinking, especially as small and medium-size companies find the cost of providing health benefits to their workers beyond their reach, Mendelson said. As fewer workers have benefits through their jobs, growing numbers will face a hard choice of whether to buy health plans through ACA marketplaces or become uninsured.

It remains unclear whether the reduction in poverty will endure beyond 2020. Sullivan, the economist from Notre Dame, and economist Bruce Meyer of the University of Chicago have been attempting to track poverty during the pandemic in “real time.” Their analysis shows a slight uptick in poverty in 2021 that worsened slightly in August as coronavirus cases surged again.

While poverty has declined across the board, racial disparities continue to exist. The percentage of Black Americans in poverty is 14.6 percent. compared with 8.1 percent for White Americans, according to supplemental census poverty measures.

What happens next to family incomes and poverty will depend largely on how many Americans are able to return to work in the coming months and whether the U.S. government extends some aid to low-income Americans.