Updated CAP poverty data project
CAP’s poverty data project contains updated U.S. Census Bureau data at the national, state, and congressional district levels all in one place. Here, users can explore data on poverty and more than a dozen other topics that measure the health of the economy and can identify potential solutions to the problems these data reveal.
This newest release from the U.S. Census Bureau’s poverty data shows that in 2022, 11.5 percent of people—37.9 million—lived in poverty under the official poverty measure, a statistically nonsignificant change compared with 2021’s rate of 11.6 percent. Meanwhile, the supplemental poverty measure rate increased to 12.4 percent—40.9 million—from 2021’s historically low rate of 7.8 percent, rising all the way back to and exceeding pre-pandemic levels.
While the economy over this period has been strong and resilient, an increase in the poverty rate reflects the consequences of policy choices made since the recovery began—specifically, a failure to build upon programs aimed at poverty alleviation in response to the COVID-19 pandemic. However, this increase in poverty under the supplemental poverty measure is reversible if policymakers permanently adopt proven strategies to grow the economy by growing the middle class through: enhancements to the child tax credit and earned income tax credit, an increased minimum wage, needed reforms to unemployment insurance, and the protection of recent permanent increases to food benefits. Doing so would advance the Biden administration’s ongoing efforts to create a more inclusive and equitable economy for all.
The value of the supplemental poverty measure
Annual poverty data from the U.S. Census Bureau provide an important snapshot of the economy’s health for those who are struggling the most financially. The Census Bureau’s data include two measures: the official poverty measure (OPM) and the supplemental poverty measure (SPM). The OPM has historically been the standard measure of poverty since its creation in the 1960s. However, the SPM, which the Census Bureau first released in 2011, has been more useful due to extra considerations included in its methodology. The OPM takes only pretax income into account and checks if it is over or under the equivalent of three times a yearly food budget from 1963, adjusted for inflation and for various household sizes and compositions. The SPM, meanwhile, better encapsulates the costs of living: After collecting income, additional in-kind government assistance, such as the Supplemental Nutrition Assistance Program (SNAP) and housing benefits, are counted along with tax credits, while out-of-pocket work or medical expenses, child support paid, and income and payroll taxes are subtracted from the total. The net total is then measured against a threshold based on food, clothing, shelter, and utilities expenditures and adjusted for geographic differences in housing costs, in addition to family size and composition. This creates a poverty measure that is more reflective of the resources people have access to and the expenses they are burdened with in their everyday lives.
Starting in 2020, the federal government passed relief packages to mitigate the health and economic harms from the pandemic and its associated recession. As a result, multiple programs geared toward enhancing economic security received increased funding and reached more people during 2020 and 2021, preventing them from falling into poverty. Even though some of this funding was reflected by the OPM, such as increased unemployment insurance (UI) benefits, much of it was only captured in SPM data, creating a significant divergence in the poverty data that the two measures produced. As shown in Figure 1, poverty under the OPM rose when the pandemic began, while it declined under the SPM in 2020 and plummeted to a record low in 2021. This difference in trends measures the impact and importance of the policies that increased financial security.
Policy inaction led to higher poverty in 2022
The passage of the American Rescue Plan Act (ARPA) in 2021 was the last anti-poverty, pandemic relief package signed into law and made improvements to the child tax credit (CTC), the earned income tax credit (EITC), UI, and SNAP, among other programs, while also providing a final round of $1,400 stimulus payments. Further investments in anti-poverty programs were initially planned, but the Senate did not have enough votes to push them through. The 2022 data clearly show the consequences of failing to extend the relief programs’ changes. Many expansions to government benefits expired by the end of 2021, allowing for some comparisons of the programs’ impacts on poverty from 2021 to 2022.
The enhanced CTC had increased total benefits to a maximum of $3,000 per child, or $3,600 for those under the age of 6, from the previous $2,000 maximum; made the credit fully refundable; and increased the maximum age for eligible children from 16 to 17, on top of providing half the credit as optional monthly payments. The EITC, meanwhile, was expanded for adults without qualifying children: The maximum credit nearly tripled to $1,502; the income limit was increased by about $5,500; and access to the credit was expanded to younger and older workers. These refundable tax credits significantly reduced poverty in 2021. This is particularly true for children in the case of the CTC, which raised 2.9 million children out of poverty. The majority of this decrease in the child poverty rate is a direct result of the improvements made from the ARPA, as these changes alone raised 2.1 million of the total 2.9 million children out of poverty.
The total number of people brought out of poverty by refundable tax credits decreased from 9.6 million in 2021 to an estimated 6.4 million in 2022. (see Figure 2) The large majority of this decline came from the smaller impact the refundable CTC in particular had on poverty in 2022, as it brought nearly 3 million fewer people—half of which are children—out of poverty compared with 2021. After the ARPA improvements to the refundable credits expired at the end of 2021, families with children and adults without qualifying children received smaller tax refunds and faced stricter eligibility requirements for both the CTC and EITC, as the program eligibility reverted to its pre-pandemic rules.
The total number of people brought out of poverty by UI also dropped significantly, from 2.3 million in 2021 to an estimated 0.4 million people in 2022. Enhancements to the UI system—which expanded eligibility to traditionally ineligible workers, provided an extra $300 per week in increased benefits, and granted additional weeks of benefits—expired nationally in September 2021 after attempts to delay the expiration failed. The economy did continue to add jobs throughout 2022, and the demand for UI had been falling, but the cutoff came too soon, and 7.5 million people lost the entirety of their benefits at once. This was nearly six times the number of people who were still receiving enhanced UI benefits the last time the federal government let it expire in December 2013 during the recovery from the Great Recession; the program was still playing an important role in supporting those who had not yet found sufficient employment at the time it ended in 2021.
The most drastic change to the number of people pulled out of poverty from any one policy comes from the economic impact payments. Three rounds of payments went out to Americans during the pandemic, with the third round being captured in the 2021 poverty data. This final payment provided $1,400 to each member of a household, including dependents, for most families, bringing an estimated 8.9 million people above the poverty threshold. Even though no payments went out at the national level in 2022, people were able to use these payments, along with other pandemic relief measures, to enjoy some financial stability while looking for better job opportunities, resulting in stronger wage growth among low-wage workers.
Finally, SNAP continued to be one of the country’s most effective anti-poverty programs, bringing 2.8 million and 3.7 million people out of poverty in 2021 and 2022, respectively. This was partially due to a timely reevaluation of the Thrifty Food Plan (TFP) that went into effect right as a temporary expansion that increased everyone’s food benefits by 15 percent had expired at the end of September 2021. This reevaluation, set in motion by the bipartisan 2018 Farm Bill reauthorization, determined that costs of a healthy diet had risen, which necessitated an increase in SNAP benefits that left most recipients with roughly an additional $12–$16 per month. Unfortunately, the emergency allotments that the federal government had provided to states for most of the pandemic’s duration to increase SNAP benefits to the maximum amount a household could receive, or a flat $95 for those already near the max, ended as of March 2023. This decrease in benefits may end up driving poverty even higher in 2023.
Increased poverty rates do not cancel out the economy’s current strengths
While the increase in poverty under the SPM is a deeply concerning consequence of ongoing underinvestment in low-income families, these data should be viewed in concert with other aspects of the economy, many of which are historically strong, and as an indicator of what works in growing the middle class and increasing financial security. Jobs are continually being added every month at rates higher than those seen pre-pandemic, unemployment is still among the lowest seen in more than 50 years, and rates of layoffs and discharges are among the lowest on record, signaling a healthy labor market. This recovery has also been far-reaching, with Black and Latino workers experiencing record low unemployment rates over the past year. Inflation has cooled significantly from last year and is low among other comparable nations, while wage growth continues to be strong, particularly for low-wage workers, even after adjusting for inflation. Real gross domestic product has also recovered and continues to grow at an impressive pace in the United States compared with its peer nations. Considering the progress made in 2021, a poverty rate of 12.4 percent should be considered unacceptable for the United States, and policymakers at all levels should take steps to reverse this trend and bring it in line with the other improving aspects of the economy.
Congress can still take action to combat rising hardship
Fortunately, there are still plenty of actions Congress can take to reduce poverty and hardship, particularly among Black people and Latinos. These groups experienced some of the highest rates of poverty in 2022, at 17.2 percent and 19.3 percent, respectively, compared with 9.1 percent for their white peers, and data suggest that programs and policies that help provide financial stability to people with low or no income often benefit these groups the most. Below are five ways Congress can build on this to expand the middle class and grow the economy.
For more information on how to cut poverty, see:
Expand the CTC to help ease financial burdens for struggling families
Under current law, the CTC will decrease again after 2025 from a maximum of $2,000 per child to $1,000, with stricter income requirements for low-income families. To avoid this, lawmakers should restore prior improvements to the credit enacted through the ARPA that reduced child poverty in 2021. This would mean increasing the credit’s size while making it fully available to those at all income levels to ensure that those with the lowest incomes can still benefit from the full credit.
Reinstate the enhanced EITC for adults without qualifying children
The enhanced EITC provided valuable assistance to the only group taxed into or deeper into poverty at the federal level. Nearly 11 million workers were made newly eligible for this credit in 2021, and roughly 17 million in total benefited. Lawmakers should ensure that these workers can continue to receive the help they need through this essential wage subsidy by restoring the improvements from the ARPA.
Reform UI to better serve the unemployed in good times and bad
The UI system must be reformed to proactively protect Americans in future economic downturns, instead of requiring congressional action to make the necessary expansions each time disaster strikes. Among the needed changes are updates to expand eligibility, extended benefit durations during normal times and downturns, and an increase to benefit levels. Additionally, UI financing should be reformed, and universal minimum standards should be implemented to ensure access to sufficient benefits is always available in all states.
Protect the TFP’s increase to SNAP benefits
The TFP’s reevaluation was long overdue and ensured that SNAP recipients did not experience a drop in their benefits amid a time of rising food prices. However, some in Congress are suggesting that the TFP should be reverted to its prior formula or are attempting to block any funding going toward increased allotments caused by the reevaluation. Both of these changes to the TFP would cut current benefit levels and with it, a vital source of economic activity in communities across that nation that supports more than 240,000 jobs per year. SNAP benefits must be protected, especially after hardship and poverty rose following the end of emergency allotments earlier in 2023.
Raise the minimum wage and eliminate the subminimum wage
Pandemic relief payments temporarily lifted millions of people out of poverty, but another way to get additional resources into the hands of people with low incomes would be to increase the minimum wage. The Raise the Wage Act of 2023 would raise the minimum wage to $17 per hour by 2028 and phase out the subminimum wage for tipped workers, teen workers, and workers with disabilities, benefiting an estimated 27.9 million workers—around 6 million of whom are in poverty.
These policies could unlock the full potential of a growing economy and a growing middle class, creating a more secure future for all.
Conclusion
The lessons from this data release are clear: Providing people who are struggling financially with the resources they need reduces poverty and grows the middle class, and bold public investment helps ensure a faster economic recovery. The government has the ability to accomplish both these goals whenever it wants—in short, poverty is a policy choice.
The declines in poverty in 2020 and 2021 under the SPM prove that a strong anti-poverty policy approach can achieve record-breaking economic success even in one of the nation’s darkest and most uncertain periods. If that same approach was carried over to a time when the country was not digging itself out of disaster, these policies could unlock the full potential of a growing economy and a growing middle class, creating a more secure future for all.
The author would like to thank David Ballard, Rose Khattar, Lily Roberts, Jean Ross, Emily Gee, Madeline Shepherd, and Shanée Simhoni for their helpful feedback as well as David Correa for their fact-checking.