Federal Aid Prevented More Economic Hardship During 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.