Poverty rose in the US in 2020 as the coronavirus pandemic hit the economy and unemployment soared. The bottom of the economic ladder was hit hardest, new data confirm, suggesting that the recession may have widened the gap between rich and poor.
The U.S. Census Bureau announced on September 14, 2021, the share of Americans living below the poverty line — US$26,695 for a family of four — rose nearly 1 percentage point to 11.4% from 10.5% a year earlier.
This metric includes wages and other sources of income, such as Social Security payments and, quite importantly, unemployment benefits in 2020. Without the massive increase in unemployment benefits to millions of unemployed Americans for more than a year, the poverty rate would certainly have climbed much higher.
As a social scientist researching poverty, I am concerned about the severe income loss experienced by some Americans and indicate that the country’s extreme income inequality is only going to worsen in 2020.
Low-income workers hit hardest
Those at the bottom of the economic scale who have been hit hard by the coronavirus slowdown are finding it harder to bounce back, according to additional data released by the Census Bureau. This has been called a K-shaped recovery.
Consider what happened with ordinary household income, which declined 2.9% in inflation-adjusted terms to $67,521 in 2020, from $69,560 in 2019.
At the same time, full-time workers saw their real average income increase by 6.9% from 2019 levels – indicating that losses were primarily borne by part-time workers and those who are not employed throughout the year.
Furthermore, the share of total income for the lowest-income households – the sum of all income generated across the country – declined by 3.4%, while it increased by 0.7% for the highest-income households.
In another sign that low-income workers were hit hardest in 2020, 53% of all jobs lost were with workers earning less than $34,000 per year.
It is not clear whether this inequality-increasing trend will continue in 2021 or will persist in the coming years. But in June 2021, there was a 21% drop in employment for low-wage workers from January 2020 levels, while employment for high-income workers increased by 9.6%.
Some success for stimulus and relief measures
The effect of incentives and support is more pronounced in the supplemental poverty measure rate, which takes into account additional sources of income, such as tax credits and other government benefits.
The census said that without a series of relief and stimulus packages implemented between March 2020 and the end of the year, the supplementary poverty rate would have reached 12.7%. Instead it was only 9.1%, 2.6 percentage points lower than it would have been otherwise.
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