Temporary Government Checks Produce Better Poverty Numbers…Temporarily
Did poverty rise or fall in 2020? That depends on how you define it. American household income fell significantly in 2020, according to data from the U.S. Census Bureau. That should come as little shock considering how much of the country was out of work because of the pandemic. But it is an interesting corollary to reports that poverty fell significantly in 2020, too.
“Nearly 8.5 million people were lifted out of poverty last year,” according to The Washington Post. But that’s a weird way to describe it because poverty—defined as a family of four living on $26,250 or less—only declined “after accounting for the government aid.”
Yes, census data shows the 2020 poverty rate at 9.1 percent—down from 11.8 percent in 2019. But this is only because the federal government gave everyone money. People who have been “lifted out of poverty” by pandemic stimulus payments and other temporary subsidies will be right back in it unless the government decides to dole out thousands per person again.
Without the stimulus money, the 2020 poverty rate would have risen to 12.7 percent, the Census Bureau said. And “by a second measure, which leaves out much of the federal stimulus payments, poverty rose to 11.4 percent from 10.5 percent,” the Post reports.
The Wall Street Journal explains further:
The bureau said the traditional poverty rate in 2020 was 11.4%, an increase of 1 percentage point from 2019 and the first increase after five consecutive years of declines. That translated to 37.2 million people in poverty, an increase of 3.3 million from 2019. … The official poverty measure doesn’t reflect how much a household pays in taxes, and it also omits noncash government aid like tax credits, housing subsidies and free school lunches. A broader poverty measure that accounts for such expenses and income actually fell last year to 9.1%, down 2.6 percentage points from 2019.
The decrease, coinciding with an increase in the official poverty rate, highlighted the role of the government safety net, which was expanded during the pandemic. The two poverty yardsticks have tracked closely for a decade, but last year was the first time that the supplemental measure dropped below the official measure.
So while fewer people living in poverty is good news, it could be something of an artificial construct. And with more complete data, it’s unclear that we have much of a reason to celebrate.
“The annual census findings also underscored the deep impact of so many job losses last year,” notes the Post. “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.”
Coming out of the pandemic, Americans may be much worse off financially than they were before, despite allegedly having been “lifted out of poverty.” People sustained by stimulus payments and unemployment benefits may find themselves unable to get a previous (or comparable) job back—although employer desperation right now at least provides some good news for those seeking employment. Meanwhile, the unusual circumstances of 2020 and 2021 may have only masked latent
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