Poverty Rates Down in 2020–Miracle or Mirage?

Frank Strickerby Frank Stricker

Did poverty rates rise or fall in 2020, the first year of the COVID pandemic? The answer to that question is somewhat complicated. On September 15th of this year the U.S. Census Bureau released its poverty estimates. For the last decade those estimates have appeared in two separate reports. Using relatively new poverty lines called the Supplemental Poverty Measure (SPM), the Census Bureau concluded that the national poverty rate fell from 11.8% to 9.1%. Employing the traditional or Regular Poverty Measure (RPM), in use since the early 1960s, the national poverty rate increased from 10.5% to 11.4% of the population.

An important take-away here is not the differences, but that even in the worse case, the poverty rate did not increase much. That’s surprising for a population that was slammed with mass unemployment. The main reason poverty rates did not soar is simple. The federal government sent trillions of dollars out to the people.

RPM vs. SPM: Is Either Useful Enough?

The Census Bureau has to determine people’s income levels in order to estimate how many fall below poverty lines. What counts as income? The newer SPM counts a lot of income and near-income that the older RPM omits. It includes stimulus payments and child tax credits, as well as food stamps (SNAP), subsidized housing, Medicaid, and the Earned Income Tax Credit. Including these as income makes more people appear to be “unpoor.” But the SPM also subtracts from people’s incomes such things as FICA, income taxes, and child-care expenses, and that makes people seem poorer than they are.

A lot of decisions go into counting income in both sets of poverty lines, but one thing needs to be emphasized. In either case, the poverty thresholds below which a household is considered poor are way too stingy. Here are three of the 48 lines in the traditional RPM. [1]

Sample RPM poverty thresholds for 2020. If your type of household had more annual income than the appropriate threshold, you were not counted as poor.

Two people in a household in which the head is 65 or older      $15,644

Four people in a family, two them under 18                                $26,246

One person, under 65                                                                     $13,465

Ponder these numbers. If you were a non-elderly singleton, and you had $14,000 of annual income, you were not deemed poor. A household of two headed by an older person that had $16,000 a year (including Social Security) would not be poor. And the four-person household would not be considered poor if its total pre-tax annual income were $27,000 a year.

My question is this: can anyone take these numbers seriously? Where would that non-poor family with only $27,000 live?  In tents on a mountain somewhere in Appalachia near a creek that provided free water and a large communal vegetable garden?

Several years ago the Economic Policy Institute calculated how much a family of four needed for a modest but adequate living standard. They used 2017 dollars, so the costs for 2020 would be a little higher, but the general point holds. If the family of four lived in Harlan County, Kentucky, they needed $66,715. In Los Angeles County, they required $93,295.

Poverty lines need to be much higher if we are to get real about how extensive poverty is. People shouldn’t be comfortable thinking that just a tenth of the population is poor. It is true that there are reasons to retain the old RPM. One is its historical value as an indicator of how far we have come since 1959 using stable poverty lines that have been revised only to reflect price changes. That’s important. So let’s have three lines. The old RPM, the SPM that experts like, and a new set of higher poverty lines.

There will be battles about how high the lines should be, but the mechanics of a broad change could be simple. We already have key facts in the annual poverty report. If poverty lines had been 50% higher last year, the national poverty rate would have been 19.4%, not 11%.

In revising the lines, the big battles will be political ones. Conservatives don’t want to know that poverty is more widespread than we thought. And the sitting president might not feel good about overseeing a jump in poverty rates even if there were no actual increase in the number of people who were suffering economically. These folks can adapt, and the results using the RPM and SPM could be released to show that poverty didn’t increase.

There’s an additional fact in favor of higher poverty lines. Except for price changes, the lines have not been revised substantially since the mid-1960s. Yet median household incomes have grown in real, purchasing power by 40% since 1967. Thus, people right at the poverty line today have the same total purchasing power they had in the 1960s, and they are much further below average incomes. [2]

There is nothing sacred about current poverty lines. Their creation involved scholarly and political choices. In the early 1960s, Mollie Orshansky, working in the Division of Research and Statistics in the Social Security Administration, used Department of Agriculture model food budgets to construct poverty lines. It was known that food budgets were, on average, a third of a family’s total spending, so Orshansky multiplied the two lowest budgets–the low-income and the emergency-economy budgets–by three to get two sets of poverty lines. She argued that the government should adopt the higher of the two–the low-income level–but the Bureau of the Budget ordered federal agencies to use the stingier of the budgets, the emergency budget. That was three fourths as high as the low-income budget. Truly lower than low. [3]

Dimensions of Poverty Rates in 2020

In the rest of this essay I rely mostly on results using the traditional RPM poverty lines. RPM estimations normally include as household income such things as unemployment benefits, Social Security payments, and Supplemental Security income. But not the Child Tax Credit or pandemic stimulus payments. Also, the RPMs do not include in-kind programs like food stamps, nor benefits that occur as part of the taxation process, such as the Earned Income Tax Credit.

Some people need assistance more than others. Many groups have been unfairly pushed down into poverty by warped social, political, and economic structures. In 2020, the poverty rate for black people rose to 19.5%, and was roughly twice the white (non-Hispanic) rate of 10.1%  and nearly 2 1/2 times the Asian rate of 8.1%. Observers wearing rose-colored glasses may point out that poverty rates for 2019 and 2020 were the lowest ever for black people. Realists can point out that there is something terribly wrong when a fifth of a particular population group is below even the subterranean official poverty lines. Ditto for Hispanics, whose 2020 rate was 17%. For disabled people in the working-age group of 18-to-64, pre-COVID poverty rates in 2019 were extremely high–22.5%. And they increased to 25% in 2020.

Work

In terms of your income level, it is better to work–and to work full-time if you can. For those who worked full-time, year-round, the poverty rate fell from 2% to 1.6%.between 2019 and 2020. [4]  People who did not work at all had very high poverty rates: 26.4% in 2019 and 28.8% in 2020. From such numbers conservatives conclude that people need to work more. And get married. It is true that married-couple families have poverty rates below 5%.

But poverty reports say little about causality, and I don’t think conservatives want to think deeply about why some poor people are not working. Some people have a hard time finding affordable child care. Some are ill or disabled. Some poor people have had less schooling. Many have to deal with direct and structural discriminations. Some are ex-prisoners whom employers will not hire except during dire labor shortages. Also, lousy wages and lousy working conditions are work disincentives. Yet despite low pay and nasty bosses, millions of poor people do work a lot. June Zaccone of the National Jobs for All Network points out that in 2020, 12% of all full-time, year-round workers, earned less than the average poverty line for a family of four–$26,496. These people were being paid less than $13 an hour, though they were, presumably, serious workers. [5]

In the late 1960s and early 1970s, before substantial improvements in Social Security benefits, older people were poorer than younger people. Now people 65 and older have a poverty rate of 9%. That is slightly below the rate for people ages 18 through 64, and it is substantially below the 16% rate for people under 18. It is true that the rate for elderly blacks and Hispanics was 17% and the rate for elderly women in each group who are on their own must be very high. Social Security needs improvements, including higher minimums.

During the first pandemic year, old and new federal programs gave people money that kept them out of poverty. Pandemic programs were crucial to people who are poorer, who live in female-headed households, who are Black, who live in the south, and who do not have a high school diploma. The same amount of money meant more to people with less of it to begin with. For example, between 2019 and 2020, households headed by someone with a B.A. or higher degree, increased their incomes by $2051; that raised their annual median income 2.3%. Those who lacked even a high school diploma received an extra $2052 and that raised their income 6.7%. Female heads of household increased their average incomes by 10.7%. [6]  Of the top three lifters, an old program, Social Security, led the way, raising 26.5 million people above poverty lines. New stimulus payments lifted 11.7 million out of poverty. New and enhanced unemployment benefits, lifted 5.5 million. [7]

A Partial To-Do List

  1. Federal poverty lines–RPMs and SPMs–are a poor measure of economic deprivation in America. New poverty lines should be at least 50% higher.
  2. New lines should count as income more federal benefits and highlight the anti-poverty effectiveness of various federal programs.
  3. The federal minimum wage, now $7.25 an hour, should be put on track to reach $20 soon. The Federal Government should create millions of good jobs and insure that low-income people and those frequently discriminated against get a fair share of new good jobs.
  4. Conservatives can stop stereotyping the poor as self-indulgent people who must not be coddled. Stop telling them to work for sub-poverty wages and start supporting a high-wage economy. Talk about the indulgences of the filthy rich. Think about $25 million for ten minutes in space.

Frank Stricker is on the board of the National Jobs for All Network, is a member of DSA, and is emeritus history professor, California State University, Dominguez Hills. He wrote American Unemployment: Past, Present, and Future (2020).

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[1] These lines are from p. 51 of the regular poverty report, Emily A. Shrider, Melissa Kollar, Frances Chen, and Jessica Semega, U.S. Census Bureau, Current Population Reports, P60-273, Income and Poverty in the United States, 2020 (U.S. Government Publishing Office, Washington, DC, September, 2021). As far as I can tell, the poverty lines used in the newer SPM are close to the old lines. See Liana E. Fox and Kalee Burns, Current Population Reports, P60-275, The Supplemental Poverty Measure, 2020, (September, 2021), 29, for three SPM alternatives that take into account housing costs. One alternative is 12% higher, one is 6% lower, and another is 13% higher than the standard RPM poverty line for a two-adult, two-child household.

[2] It is good to remember that very few people in poverty are at or near the poverty line itself. Most are much poorer than that low line.

[3] The Orshansky story gets more detail in my book, Why America Lost the War on Poverty-and How to Win It (2007), 56-57. By the way, the Biden Administration was able to change a foundational living standard plan that had been in use for more than half a century. They increased Food Stamp benefits, which had not been increased, except for price changes, since the program started with the 1962 Thrifty Food Plan. The reform was made possible by legislation passed in 2018 by a Republican Congress which ordered the Department of Agriculture to review the basic plans behind benefit levels. As it turned out many Republicans and conservatives were not happy about the upgrades. I guess it was too soon–just 60 years.

[4] This decline may reflect a compositional effect. More low-income and poor workers dropped out of the work force than higher-income workers.

[5] The Bureau of Labor Statistics does its own estimates of the working poor. They are lower than June Zaccone’s. Some of the people in Zaccone’s estimate live in households with other earners and that could bring them over the poverty line.

[6]  The source for this paragraph is 71-72 in Income and Poverty.

[7] The Supplemental Poverty Measure, 2020, pp. 2 and 12.

 

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