U.S. poverty fell overall in 2020, a surprising decline that is largely a result of the swift and large federal aid 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 reported that the official poverty rate rose slightly in 2020 to 11.4%, up from a record low 10.5% in 2019, but that figure leaves out much of the government aid. After accounting for all the federal relief payments, the so-called supplemental poverty measure declined to 9.1% in 2020—the lowest on record and a significant decline from 11.8% in 2019.
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% 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.
Median income declined one of the largest declines in a single year. The Census Bureau attributed this to so many people losing jobs.
The jump in the uninsured last year—to 28 million among those who lacked coverage at any point in the year from 26.1 million in 2019 – was somewhat greater than the increase in 2019, as the pandemic stole jobs and caused laid-off workers to lose health benefits—especially in the public health crisis’s early months. Indeed, the pandemic’s most significant effect was to lower the number of Americans with private insurance while expanding the numbers who had some health insurance through some form of public coverage.
President Joe 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.
The poverty rate spiked to 15.1% in 2010 during the aftermath of the Great Recession and did not begin to decline much until 2013 – six years after the recession began. Many economists fault the U.S. government for not providing enough aid after that deep recession to help prevent widespread hunger, job loss and foreclosure.
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% of U.S. residents who lacked coverage throughout 2020 was close to 2018 levels, Census officials said.
Some laid-off workers moved 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%, a slight drop from the previous year.
Former President Donald Trump’s opposed the health-care law and federal health officials’ efforts to undercut it. With weeks of taking office last winter, Biden ordered an unprecedented special enrollment period, eventually lasting six months, to encourage people whose insurance was a casualty of the pandemic to buy marketplace health plans. The effects of that opportunity will be reflected in the 2021 census data expected a year from now.
Since soon after the pandemic began in March 2020, health policy specialists have sought to estimate the crisis’s effects on insurance, but the Census figures are considered the gold standard.