Covid relief cited as fewer Americans finished 2020 in poverty

WASHINGTON — U.S. poverty fell overall in 2020, a surprising decline that was largely because of 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.

In the latest and most conclusive evidence that poverty fell because of the aid, the Census Bureau reported Tuesday that 9.1% of Americans were living below the poverty line last year, down from 11.8% in 2019. That figure — the lowest since records began in 1967, according to calculations from researchers at Columbia University — is based on a measure that accounts for the impact of government programs. The official measure of poverty, which leaves out some major aid programs, rose to 11.4% of the population.

The government defines poverty as an income below about $13,000 for an individual, or about $26,000 for a family of four, although the exact threshold varies depending on family size, homeownership status and regional housing costs.

“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.”

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 Joe Biden is urging Congress to enact a more lasting expansion of the safety net that would extend well beyond the pandemic as part of a $3.5 trillion package that would make significant investments in many parts of the economy. Democrats’ $3.5 trillion plan, which is still taking shape, could include paid family and medical leave, government-supported child care and a permanent expansion of the Child Tax Credit.

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, and liberals are arguing for the programs to be expanded.

But conservatives contend that safety-net programs exacerbate worker shortages and add to already skyrocketing levels of federal debt unnecessarily while discouraging people from working.

AID’S EFFECTS

The fact that poverty did not rise more during an enormous economic disruption reflects the equally enormous response. Congress expanded unemployment benefits and food aid, doled out hundreds of billions of dollars to small businesses and sent direct checks to most Americans.

The Census Bureau estimated that the direct checks alone lifted 11.7 million people out of poverty last year; unemployment benefits and nutrition assistance prevented an additional 10.3 million people from falling into poverty, according to an analysis of the data by The New York Times.

A separate Department of Agriculture report last week showed that, because of the aid, hunger did not rise in 2020.

“It all points toward the historic income support that was delivered in response to the pandemic and how successful it was at blunting what could have been a historic rise in poverty,” said Christopher Wimer, a co-director of the Center on Poverty and Social Policy at the Columbia University School of Social Work. “I imagine the momentum from 2020 will continue into 2021.”

Poverty rose much more after the previous recession, peaking at 16.1% in 2011, by the measure that takes fuller account of government assistance, and improving only slowly after that. Many economists have argued that the federal government did not do enough then and pulled aid too quickly.

Despite the more aggressive response this time, the census findings also underscored the deep impact of so many job losses last year. Median income declined sharply, 2.9%, to $67,521, reflecting the fact that about 13.7 million fewer people worked full time year-round compared with 2019. Among those who kept their jobs, however, median earnings rose 6.9%.

The decline in poverty last year was broad-based. It fell among all racial and ethnic groups, among all family types, and among Americans at every age and education level.

But government programs excluded some groups, such as immigrants without legal status and their families, and failed to reach others. Poverty was significantly higher than the overall average for Black and Hispanic Americans, foreign-born residents and those without college educations.

HEALTH COVERAGE

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% 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%, a full percentage-point drop from the year before. Meanwhile, the proportion covered under Medicaid increased slightly from 17.2% in 2019 to 17.8% 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% in 2019 to 8.3% last year — a far larger share of Hispanics were uninsured — 18.3% in 2020, compared with 16.7% the previous year. Among Black residents, the uninsured rate increased to 10.4% last year, up from 9.6% 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 Affordable Care Act health plans inexpensively.

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, said Dan Mendelson, chief executive of Morgan Health, a company focused on health-care innovation in employer markets.

As fewer workers have benefits through their jobs, growing numbers will face a hard choice of whether to buy health plans through Affordable Care Act marketplaces or become uninsured.

The insurance trends highlight an emerging pattern in which “the government’s role is just growing every year,” Mendelson said.

BIDEN PROPOSALS

Biden’s “Build Back Better” proposal does not include stimulus checks. But it does include extensive financial support for lower-income Americans, including universal preschool 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.

Nakitta Long, a single mother of two who was laid off from a North Carolina automotive plant at the start of the pandemic, said government aid helped her get back on her feet.

The first relief check helped cover rent and a car payment, and enhanced unemployment benefits helped sustain her family until she was called back to work in October.

“The stimulus relief, it has been a blessing for my family, because there was so much uncertainty there financially,” said Long, 46.

Still, Long waited weeks to start receiving unemployment benefits. Then, in July 2020, the $600-a-week federal supplement to state unemployment benefits lapsed. She fell behind on bills, setting in motion events that ultimately left her family homeless for two months this year.

New aid programs adopted this year, including the expanded Child Tax Credit, helped Long, who moved into a new home last month. She said she had noticed improvements in her children, particularly her 5-year-old son.

“It was bad, but it could have been so much worse, and we have come out the other side once again unbroken,” Long said.

“It all points toward the historic income support that was delivered in response to the pandemic and how successful it was at blunting what could have been a historic rise in poverty. I imagine the momentum from 2020 will continue into 2021.”

— Christopher Wimer, a co-director of the Center on Poverty and Social Policy at the Columbia University School of Social Work

LAPSING BENEFITS

Many of the programs that helped people avert poverty last year have expired, even as the pandemic continues. An estimated 7.5 million people lost unemployment benefits this month after Congress allowed expansions of the program to lapse.

“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.”

Jen Dessinger, a photographer who lives in New York City and Los Angeles, said work dried up abruptly at the start of the pandemic. A freelancer, she didn’t qualify for traditional unemployment benefits but eventually received help under a federal program created last year to help people who fell outside the regular system.

Now that program has ended in the middle of another surge in coronavirus cases. Dessinger said a single positive coronavirus case could shut down a photo shoot. “It’s made it a more desperate situation,” she said.

Democrats on Tuesday said experiences like Dessinger’s showed both the potential for government aid to protect people from financial ruin, and the need for a more expansive, permanent safety net that can support people in bad and good times.

A White House economist, Jared Bernstein, said Tuesday that the new poverty data should encourage lawmakers to enact the $3.5 trillion Democratic measure that includes much of Biden’s economic agenda, which the administration argues would create more and better-paying jobs.

“It’s one thing to temporarily lift people out of poverty — hugely important — but you can’t stop there,” said Bernstein, a member of Biden’s Council of Economic Advisers. “We have to make sure that people don’t fall back into poverty after these temporary measures abate.”

But even as Democrats cheered the Tuesday report, most Republican lawmakers, who were in control of the Senate and the White House last year, did not issue statements promoting the poverty numbers. That may be a reflection of the party’s unified opposition to the Democratic push for more social programs, which the Senate minority leader, Mitch McConnell, described Monday as a “reckless taxing and spending spree.”

Conservative policy experts said that although some expansion of government aid was appropriate during the pandemic, those programs should be wound down, not expanded, as the economy healed.