Skip to content

Federal Aid Prevented More Economic Hardship During the Pandemic

Incomes dropped but poverty largely held steady due to stimulus relief, Census Bureau finds

A woman is putting a carrot into a bag

David Paul Morris/Bloomberg via Getty Images

A volunteer puts carrots in a bag at the San Francisco-Marin Food Bank.

Massive government relief passed in response to the COVID-19 pandemic moved millions of Americans out of poverty last year, even as the official poverty rate increased slightly, the Census Bureau reported Tuesday.  

The official poverty measure rose 1 percentage point in 2020, with 11.4 percent of Americans living in poverty, or more than 37 million people. It was the first increase in poverty after five consecutive annual declines.

But the Census Bureau’s supplemental measure of poverty, which takes into account government benefit programs and stimulus payments, showed that the share of people in poverty dropped significantly after the aid was factored in.

The supplemental poverty measure was 2.6 percentage points lower than its pre-pandemic level in 2019. Stimulus payments moved 11.7 million people out of poverty, while expanded unemployment benefits kept 5.5 million from falling into poverty. Social Security continued to be the nation’s most effective anti-poverty program.

“This really highlights the importance of our social safety net,” said Liana Fox, chief of the Census Bureau’s poverty statistics bureau.

The Census reports released Tuesday cover income, poverty and health insurance, and amount to an annual checkup on the economic status of average Americans. They are based on extensive surveys and analysis.

In 2020, among people age 65 and older, the poverty rate was 9 percent and the total number in poverty was roughly 5 million, both essentially unchanged from 2019.

AARP Membership -Join AARP for just $9 per year when you sign up for a 5-year term

Join today and save 43% off the standard annual rate. Get instant access to discounts, programs, services, and the information you need to benefit every area of your life. 

During last year’s epic economic collapse, employers shed 22.4 million jobs in March and April, the sharpest decline since records began in the 1940s. Weekly applications for unemployment benefits topped 6 million in a single week in April, by far the highest on record. Since then, the economy has recovered three-quarters of those lost jobs, but the U.S. still has 5.3 million fewer positions than before the pandemic.

Median incomes dropped last year

A basic indicator of the economic health of the middle class registered the shock.

The median — or midpoint — household income decreased by 2.9 percent to $67,521 in 2020. The median is a dividing line, with half of American households having lower incomes and the other half higher. It was the first statistically significant drop in that measure in nearly a decade.

The 2020 median income for homes in which the head of household was between the ages of 55 and 64 was $74,270, a 3.1 percent decrease from $76,631 the previous year. The median income for those age 65 and older was $46,360, a 3.3 percent drop from $47,949 in 2019. 

Driving the erosion, the number of people with earnings from work fell by about 3 million and the number of full-time year-round workers contracted by some 13.7 million.

Below those top lines it was a story of haves and have-nots.

People who held on to steady year-round jobs saw an increase in economic well-being, with their median earnings rising 6.9 percent after adjusting for inflation. People on the lower rungs of the job market, those with part-time jobs or trying to stay afloat in the gig economy, lost ground as median earnings decreased 1.2 percent for workers overall. 

Health care coverage held steady

Despite widespread concerns that the pandemic would make millions more Americans uninsured, health coverage held its own in 2020, the Census Bureau found. More than 91 percent of Americans had insurance; 28 million were uninsured. 

But Larry Levitt of the nonpartisan Kaiser Family Foundation said the numbers revealed some glaring exceptions. For example, 38 percent of poor working-age adults in the dozen states that have not expanded Medicaid were uninsured.

“It would be hard to find a group that struggles more to get access to affordable health care,” Levitt said.

Congress passed five bipartisan COVID-19 response bills last year, totaling close to $3.5 trillion and signed into law by then-President Donald Trump. This year Congress pushed through President Joe Biden’s nearly $1.9 trillion American Rescue Plan. Its effects are not reflected in the Census Bureau reports.

Though some of the federal aid last year was delayed for reasons including wrangling over costs and problems with distribution, on the whole it insulated families from economic disaster that would have compounded the public health crisis. Some were left out, such as people not legally authorized to be in the country.

On a historical note, the Census Bureau reports documented that government aid was much more effective in preventing poverty last year than a decade earlier in the aftermath of the 2008-2009 Great Recession. Even after accounting for government programs, the supplemental measure of poverty rose in 2010, while it fell sharply in 2020. That reflects how much more financial juice was provided by Congress and the Trump administration in 2020, compared with President Barack Obama’s roughly $900 billion package in 2009.

That’s relevant to the current debate over Biden’s social infrastructure plan, said public policy analyst Robert Greenstein of the Brookings Institution think tank. 

“For people who have a cynical view that nothing much government does works effectively, particularly on the poverty front, it will be harder to maintain that view,” said Greenstein, who founded the Center on Budget and Policy Priorities, a nonprofit advocating on behalf of low-income people.