Massive government relief passed in response to the COVID-19 pandemic moved millions of Americans out of poverty last year, even as the official poverty rate increased slightly, the Census Bureau reported Tuesday.
The official poverty measure rose 1 percentage point in 2020, with 11.4% of Americans living in poverty, or more than 37 million people. It was the first increase in poverty after five consecutive annual declines.
But the Census Bureau’s supplemental measure of poverty, which takes into account government benefit programs and stimulus payments, showed that the share of people in poverty dropped significantly after the aid was factored in.
The supplemental poverty measure was 2.6 percentage points lower than its pre-pandemic level in 2019. Stimulus payments moved 11.7 million people out of poverty, while expanded unemployment benefits kept 5.5 million from falling into poverty. Social Security continued to be the nation’s most effective anti-poverty program.
“This really highlights the importance of our social safety net,” said Liana Fox, chief of the Census’ poverty statistics bureau.
That finding is likely to resonate in a divided Congress, where President Joe Biden’s $3.5 trillion “Build Back Better” domestic agenda faces uncertain prospects. Two anchors of last year’s COVID response — enhanced unemployment benefits and a federal eviction moratorium — have expired, adding to concerns.
The White House quickly took note.
“The key takeaway from this report is the extremely powerful anti-poverty and pro-middle class income impacts of the government response in 2020,” said spokeswoman Emilie Simons. “It isn’t enough to temporarily lift people out of poverty, we need to provide opportunities for working Americans and their families to stay there.”
The Census reports released Tuesday cover income, poverty and health insurance, and amount to an annual check-up on the economic status of average Americans. They are based on extensive surveys and analysis.
During last year’s epic economic collapse, employers shed 22.4 million jobs in March and April, the sharpest decline since records began in the 1940s. Weekly applications for unemployment benefits topped 6 million in a single week in April, by far the highest on record. Since then, the economy has recovered three-quarters of those lost jobs, but the U.S. still has 5.3 million fewer positions than before the pandemic.
A basic indicator of the economic health of the middle class registered the shock.
The median — or midpoint — household income decreased by 2.9% to $67,521 in 2020. The median is a dividing line, with half of American households having lower incomes and the other half, higher. It was the first statistically significant drop in that measure in nearly a decade.
Driving the erosion, the number of people with earnings from work fell by about 3 million and the number of full-time year-round workers contracted by some 13.7 million.
Below those toplines it was a story of haves and have-nots.
People who held on to steady year-round jobs saw an increase in economic well-being, with their median earnings rising 6.9% after adjusting for inflation. People on the lower rungs of the job market, those with part-time jobs or trying to stay afloat in the gig economy, lost ground as median earnings decreased 1.2% for workers overall.
Despite widespread concerns that the pandemic would make millions more Americans uninsured, health coverage held its own in 2020, Census found. More than 91% of Americans had insurance, but 28 million were uninsured.
But Larry Levitt of the nonpartisan Kaiser Family Foundation said the numbers revealed some glaring exceptions. For example, 38% of poor working age adults in the dozen states that have not expanded Medicaid were uninsured. Biden’s budget bill would provide a workaround.
“It would be hard to find a group that struggles more to get access to affordable health care,” Levitt said.
Congress passed five bipartisan COVID-19 response bills last year, totaling close to $3.5 trillion and signed into law by then-President Donald Trump. This year Democrats pushed through Biden’s nearly $1.9 trillion American Rescue Plan on party-line votes. Its effects are not reflected in the Census reports.
Though some of the federal aid last year was delayed for reasons from wrangling over costs to problems with distribution, on the whole it insulated families from economic disaster that would have compounded the public health crisis. Some were left out, such as people not legally authorized to be in the country.
As Americans fought over measures like mask wearing and closing down businesses and community life, lawmakers of both parties were motivated to take dramatic action, said economist Bruce Meyer, a University of Chicago expert on poverty.
“You had Democrats who were very focused on helping those who were unemployed and hurting, and you had Republicans who were willing to do many things to help the reelection of their president, so there was a confluence of incentives, or of desires, by politicians on both sides,” he said.
On a historical note, the Census reports documented that government aid was much more effective in preventing poverty last year than in the aftermath of the 2008-2009 Great Recession, a decade earlier. Even after accounting for government programs, the supplemental measure of poverty rose in 2010, while it fell sharply in 2020. That reflects how much more financial juice was provided by Congress and the Trump administration in 2020, compared with President Barack Obama’s roughly $900 billion package in 2009.
That’s relevant to the current debate over Biden’s social infrastructure plan, said public policy analyst Robert Greenstein of the Brookings Institution think tank.
“For people who have a cynical view that nothing much government does works effectively, particularly on the poverty front, it will be harder to maintain that view,” said Greenstein, who founded the Center on Budget and Policy Priorities, a nonprofit advocating on behalf of low-income people.
Among other provisions, the Biden plan extends tax credits for families with children, which is seen as a strategy for reducing childhood poverty and its long-term consequences. The Census reports for 2020 showed that childhood poverty would have increased without the impact of government benefits. Instead it declined.