Progress on Poverty, but Immediate and Long-Term Problems Remain
To mark Tuesday’s release of the 2019 income, poverty, and health insurance coverage data from the U.S. Census Bureau, Spotlight on Poverty and Opportunity invited reactions and analysis from across the ideological and policy spectrum. This analysis is from Scott Winship, a resident scholar and director of Poverty Studies at the American Enterprise Institute.
The new poverty estimates indicate lower levels of hardship in 2019 than ever before, a fact that seemed to surprise even the Census Bureau. The pandemic caused some measurement problems that may have produced a slightly too-rosy picture, but even those are not enough to change the conclusion.
The most important declines have come among children. According to the official poverty rate, 14.4 percent of children were poor last year. You have to go back to 1973 to find a poverty rate that low, when single parenthood was much rarer. The increase in single parenthood has made it more and more difficult to reduce poverty. Indeed, last year’s poverty rates were at 60-year lows for both children of married parents and children in single-parent households. (Published poverty rates go back only to 1959, but these are almost surely all-time lows.)
If those conclusions are surprising, it will be even more surprising to hear that the official poverty measure understates the extent to which hardship has declined over time. Two careful studies have poverty falling fairly steadily since the early 1980s, which itself involved a temporary interruption of an earlier decline. Those studies improve on the official poverty measure by accounting for income and inflation measurement issues, falling taxes, rising noncash benefits, and increased cohabitation.
The long-term poverty trend has to be regarded as cause for celebration. Of course, 2019 feels like a long time ago thanks to the novel coronavirus. But—surprise again—the evidence suggests that poverty actually continued to fall in the initial months after COVID-19 forced us out of workplaces, schools, and the public square. That decline happened despite unemployment rising to levels not seen since the Great Depression. How is that possible? The CARES Act, passed by Congress and signed into law in March, bolstered the safety net through the Economic Impact Payments that went to most households, expanded unemployment benefits, and other policies.
All this positive news must be tempered by three unfortunate facts. First, poverty jumped upward in July and August. Hardship remained below pre-lockdown levels, but the increase should be a warning to policymakers, as key CARES Act provisions expired in those two months.
Second, while poverty has fallen substantially over recent decades, research consistently indicates that upward intergenerational mobility out of poverty has not budged over the long run. This stagnation could reflect the counter-productive long-term effects of the safety net. Giving resources to people will prevent or reduce hardship in the short-term. But in the long run, the perverse incentives not to work, save, invest in human capital, or create stable marriages might produce greater multigenerational poverty. We must provide a humane safety net to reduce immediate hardship, but earnings and savings will be lower the more generous are those benefits, and policy must balance this trade-off.
Finally, progress on poverty reduction has left vast disparities in place. While just 8 percent of non-Hispanic white children were poor in 2019, and only 6 percent of Asian children, 26 percent of Black children and 21 percent of Hispanic children lived below the poverty line. While the poverty rate is just 5 percent among children with married parents, one-third (31 percent) of children in single-mother households are poor. It is important to hold parents accountable for the choices that affect their children, but we still must provide opportunity to kids who aren’t involved in their parents’ relationship decisions.
The nation has made great unacknowledged strides in reducing hardship, but even if we were not in the midst of a life-changing pandemic, it would be no time for indifference to the fate of poor children.
Scott Winship is a resident scholar and director of poverty studies at the American Enterprise Institute.