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According to the official poverty measure of the U.S. Census Bureau, 37.9 million people lived in poverty in 2021. Digging deeper into that statistic reveals important variations in income and poverty both over time and across demographic characteristics – and provides valuable insight on the causes and effects of poverty for our nation, our economy and our federal budget. Below are seven key trends to help understand poverty in the United States.
The official poverty measure was developed in the mid-1960s to quantify cash resources for households. It compares pre-tax cash income to a poverty threshold adjusted for family size. The level of poverty is set at three times the cost of a minimum food diet in 1963 and is adjusted using the Consumer Price Index for All Urban Consumers (CPI-U), a measure of the average change in prices paid by consumers for a basket of goods and services. For a family of four (2 adults and 2 children under 18 years) within that 48 contiguous states, the poverty line by this measure in 2021 was $26,500.
By contrast, another measure, the supplemental poverty measure (SPM), defines poverty by comparing resources against a determination of need. “Need” accounts for expenditures mostly related to food, clothing, shelter, and utilities. That need is compared to disposable income (after taxes and certain other expenses) and accounts for the value of certain non-cash benefits. The SPM is meant as a research tool to supplement the official measure, not to replace it or to measure eligibility for anti-poverty programs.
In most years, the two measures have moved in tandem, with the official poverty rate generally from 0.6 and 1.6 percentage points lower than the SPM. However, in 2020, programs enacted to provide income support in response to the pandemic had a large effect on the SPM, causing it to be lower than the official poverty rate. Examples of programs enacted to provide income support in 2020 include expanding unemployment insurance, expanding SNAP benefits to children and allowing states to issue additional benefits, housing assistance, childcare support for essential workers, and rental assistance. In 2021, the SPM continued to be lower than the official poverty measure, reflecting large stimulus payments and tax credits associated with continued COVID relief, which were excluded from income for the official measure but included in the SPM.
The income-to-poverty ratio helps to better understand how many people live near poverty, as well as the depths of poverty, in the United States. The following chart uses data on the official poverty rate. In 2021, of the 37.9 million people in poverty, about half, 18.2 million, were in deep poverty (meaning that 48 percent of all people in poverty earned less than half of the poverty threshold). Meanwhile, 11.6 million people lived just above the poverty line.
While the SPM overall has declined, poverty rates for Black and Hispanic Americans have decreased more noticeably. Nevertheless, they remain well above the average. The SPM for Black Americans and Hispanic Americans showed a decrease in poverty from 14.7 percent and 14.0 percent in 2020 to 11.3 percent and 11.2 percent in 2021, respectively.
As highlighted above, child poverty measured by the SPM fell in 2021 from 9.7 percent to 5.2 percent, which is the lowest recorded child SPM. That decline is largely attributed to stimulus payments and the refundable Child Tax Credit, which increased resources for families with children. The official poverty rate for children under 18 followed a similar narrative – decreasing by 0.7 percentage points to 15.3 percent in 2021.
Conversely, there was an increase in poverty of 1.4 percentage points, from 8.9 percent to 10.3 percent, for Americans 65 years or older under the official rate. The SPM grew by 1.2 percentage points, from 9.5 percent to 10.7 percent, for that age group. The COVID-19 pandemic caused disruption in work and older Americans were slower (or had more difficulty) going back to work. Also, older Americans’ wages have been increasing by less than younger Americans’ wages in recent years, and inflation has been high (heavily influencing many older Americans who are on fixed incomes). Each of those factors are contributing to the increase in the poverty rate for older Americans.
The Northeast and Midwest had the lowest percentages of people in poverty in 2021 as measured by both the official rate and the SPM. The South, meanwhile, had the highest poverty rate, at 13.2 percent, for the official poverty rate. Traditionally, the official poverty rate has shown the South to have persistently high levels of poverty. However, under the SPM, the West had the highest poverty rate in 2021, at 8.9 percent.
Overall, for the SPM each region revealed a decrease in poverty between 2020 and 2021. The difference between the region with the highest poverty under the official rate and the SPM is because of different mixes of housing costs, housing tenures, and noncash benefits. The lower cash income in the South compared to the West is offset by lower housing costs, longer housing tenures, and more noncash benefits, making the SPM in the South lower than in the West.
In 2021, median income ranged from $48,297 for Black heads of household to $77,999 and $101,418 for White and Asian household heads, respectively.
The increase in median income for all workers was 4.6 percent in 2021, rising from $41,535 to $45,470. Among full-time, year-round workers in 2021, men had median earnings that were over $10,000 higher than women. The female-to-male earnings ratio was 0.84 — largely unchanged from 2020.
Poverty remains a significant structural challenge in America and was exacerbated by the pandemic. As the United States continues to emerge from the pandemic, understanding the nature of poverty will be essential to identify the most efficient use of federal dollars for anti-poverty programs and initiatives that will help raise up more Americans out of poverty and, in turn, support inclusive and widely shared economic growth for the future.
Related: Income Inequality Has Been On The Rise Since The 1980s, And Continues Its Upward Trajectory
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