The decline in the poverty rate means that millions of Americans were lifted out of severe financial hardship last year, the U.S. Census said. Poverty is defined as having an income of less than $26,250 a year for a family of four.
Extensive federal relief assistance passed during the coronavirus pandemic is widely credited by economists and policy experts for preventing another Great Depression. The stimulus payments provided $1,200 cash payments to most low-income and middle-class Americans last year, moving 11.7 million people out of poverty, the Census said. Another 5.5 million people were prevented from falling into poverty by the enhanced unemployment insurance aid.
“This really highlights the importance of our social safety net,” said Liana Fox, chief of the U.S. Census Bureau’s Poverty Statistics Branch.
The annual findings also showed that median income declined by 2.9 percent in 2020 to $67,500, and the proportion of Americans without health coverage rose slightly in 2020, marking the fourth year in a row that the ranks of the uninsured swelled.
Still, after accounting for the government aid, every age group, racial and ethnic group and educational level saw a decline in poverty. Some of the largest declines in poverty were reported for families headed by single moms, 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 that we would see poverty rise again because we’ve now seen these relief packages expire.”
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 lowering poverty and hardship.
As people lost jobs as parts of the economy shut down, it also impacted their health insurance. The jump in the uninsured last year to 28 million, up from 26.1 million in 2019, was somewhat greater than the increase in 2019. The pandemic lowered the number of Americans with private insurance while expanding the numbers who had some health insurance through some form of public coverage.
Overall, the health insurance impact of the public health crisis was not as dire as some public policy experts had anticipated early on in the pandemic. The 8.6 percent of U.S. residents who lacked coverage throughout 2020 was close to 2018 levels, Census officials said.
Some laid-off workers pivoted to private health plans sold on Affordable Care Act marketplaces, as well as Medicaid, the insurance system for low-income Americans that is a joint responsibility of the federal government and states. The proportion of Americans with job-based coverage was 54.5 percent, a slight drop from the previous year.
The insurance findings also highlight long-standing disparities in insurance coverage among racial and ethnic groups, and, 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) far more Hispanics were uninsured – 18.3 percent last year, compared with 16.7 the previous year. Among Blacks, the uninsured rate also 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.
And 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 ACA.. Unlike his predecessor, President 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.
In the poverty and income data, it’s unclear if the 2020 gains, with more people lifted from poverty, will endure. Sullivan 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.
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.
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