New Census Data Show Federal Investments Kept Millions out of Poverty, But Texas Needs Bold Action

Looking for trends for Texas cities and counties? This year’s American Community Survey estimates are delayed. Learn more here! 

Data released by the U.S. Census Bureau this morning shows the nation as a whole had a slight decrease in median real income (-2.9%) in 2020 compared to 2019, primarily due to 13.7 million fewer workers having full-time, year-round work — the largest year-to-year decrease since data collection began in 1967 — and 3 million fewer people having earnings at all in 2020 (stay tuned next week for our analysis of what this means for healthcare coverage for Texans, the majority of whom rely on employer-sponsored health insurance). This is the first statistically significant decrease in national income since 2011. National official poverty rates also increased 1 percentage point to 11.4% from 10.5%, the first increase in five years, while family poverty increased to 8.7% from 7.8%.

But results could have been much worse. Families underwent extraordinary hardships with the onset of the pandemic (including the March-April 2020 recession), but policy interventions kept many of them afloat. Proactive COVID-19 relief investments from the CARES Act and American Rescue Plan Act (ARPA) kept millions out of poverty, and highlight the importance of sustaining efforts with a thoughtful Build Back Better Act (read more national commentary by the Center on Budget and Policy Priorities here). 

Looking at multi-year averages for Texas, the state’s official poverty rate for 2018-2020 of 12.9% (3.7 million people) is significantly worse than the national average of 11.2% (36.5 million people) for the same time period. Only five states had significantly worse official poverty averages than Texas in recent years (Mississippi, Louisiana, New Mexico, Arkansas, and District of Columbia). Two-year trends in poverty showed Texas improving, with a 2019-2020 average of 12.5% significantly better than the 2017-2018 average of 13.4% – however, it should be cautioned that multi-year poverty averages can obscure how difficult 2020 was for many families, given that poverty rates had been improving in years prior. (Due to the small sample size of the Current Population Survey and data collection challenges in 2020, analyzing one year trends at the state level is not recommended). 

Practically speaking, the Official Poverty Thresholds of $13,465 for an individual and $26,246 for a family of four are conservatively low, leading many to turn instead to estimates like ALICE, which helps us better understand the realities of Asset Limited, Income Constrained, Employed Households above the federal poverty level.

The U.S. Census Bureau also provides alternative poverty measures. While the Official Poverty Measure only includes cash income, the Supplemental Poverty Measure shows the effect of programs like Social Security, refundable tax credits, SNAP, and more which help people stay out of poverty — as well as detracting costs like medical expenses. Texas’s supplemental poverty rate average for 2018-2020 is 12.5% (3.6 million people), which is significantly better than the official poverty average of 12.9% (3.7 million people). The supplemental poverty measure shows the significance of non-cash benefits and social safety net measures in keeping families out of poverty. 

These programs helped keep millions of people out of poverty nationally in 2020 – and aside from social security (helping 26.5 million), the interventions with the largest estimated impact were economic impact/stimulus payments (helping 11.7 million), followed by unemployment insurance (5.5 million) and refundable tax credits (5.3 million). On the flip side, medical expenses put an additional 5 million people below poverty.

In 2020, the U.S. South region (which includes Texas) had the lowest pre-tax median income of all, and decreased 2.3% to $61,243 from $62,657, while poverty rates increased to 13.3% (16.6 million people) from 12%. However, post-tax incomes actually improved 4.7% to $58,085, the largest increase of all regions, showing the equitable impact of additional stimulus payments and tax credits. The South greatly benefited from federal support. The Gini Index, a measure of income inequality (where 0 is perfect equality and 1 is perfect inequality), shows that nationally, post-tax income distribution actually slightly improved (-3.1% to 0.428) thanks to the implementation of equitable tax credits. 

Without the substantial support provided by the CARES Act, ARPA, and other state and local investments, Texas and the nation could have experienced a greater rise in poverty, impacting not only today but our future. Child poverty, for example, is shown to have cascading long-term impacts. 

Regardless of overall trends, it is also important to highlight not every group experiences financial gains and losses equally. Nationally, women continued to earn just 83% of what men earned for full-time year-round work in 2020, with no significant change from 2019. But most job losses hit at the lower end of the income distribution (54% affecting full-time, year-round workers making less than $34,000), which primarily impacts women, Black, brown, Indigenous, and immigrant workers who are disproportionately in low-income jobs due to systemic racism and sexism. 

The many types of data the U.S. Census Bureau collects are an invaluable source for helping us measure progress toward achieving a Texas where everyone is healthy, well-educated, and financially secure. Regardless of the measure, this data clearly reveals the need for bold, transformative public policy to improve lives and advance racial and economic equity at the federal and state level. 

The impact of policy is huge. Texas must take advantage of opportunities like American Rescue Plan funding to strategically invest in long-term equitable economic recovery. COVID-19 relief investments to date have kept millions out of poverty, especially low-income families without savings cushions, which helped maintain overall consumption levels and prevent further spiraling of the economy. Child poverty rates were buffered by unemployment supplements, SNAP expansion, the Earned Income and Child Tax Credit (CTC) transfers, stimulus checks, and monthly CTC payments. The Center on Poverty & Social Policy estimates that poverty rates would be significantly higher for everyone without these investments, and Child Tax Credit expansion alone is estimated to have kept 3 million children out of poverty.

COVID-19 resulted in increased rates of unemployment, food insecurity, and housing insecurity for all Texans, with a disparate impact on Texans of color and families with children. Hardships have hit Black and brown communities the hardest, as they disproportionately work in industries with job instability due to historical and current labor market discrimination, and have been historically excluded from equal access to wealth-building opportunities like affordable higher education and home ownership that can help insulate families from shock. The impact of COVID-19 highlighted embedded inequities in our system that make it difficult for all Texans to thrive, unless we make purposeful and sustained investments in equitable economic recovery. 

The economic gains from achieving equity would be huge — per estimates by the Federal Reserve Bank of San Francisco, the U.S. economy would have had $2.6 trillion more in GDP in 2019 if labor market gaps by race and gender were eliminated. When children, families, and workers of different backgrounds do better, we all do better. Build Back Better investments, permanent expansion of the Child Tax Credit, and unemployment insurance reform are several promising policy paths toward equity.

While employment and household budget indicators for Texas have improved in recent months, thanks in part to the American Rescue Plan, households continue to face hardship. According to recent Household Pulse Survey data from the U.S. Census Bureau (for the weeks of August 18-30, 2021): 

• Almost 1 in 5 Texas households lost employment income in the past month –
  including 1 in 4 Black and Hispanic households. Sustained efforts to expand state and federal unemployment insurance are essential. 
• Over 4.5 million Texans – or 1 in 5 working age adults – are essential workers, keeping our healthcare, education, food, and other vital services running. Almost half have children, yet lack sufficient childcare and worker protections.
• Over 5 million Texans received a Child Tax Credit payment last month, enabling them to meet basic needs. Permanent expansion of the Child Tax Credit would drastically reduce child poverty.
• 1 in 10 Texas families with children reported not having enough to eat last week. Of multiracial families, 1 in 3 did not. Expanded nutrition programs helped families, but more investment is needed to counter the effects of systemic racism.
• 18% of Texas households with children reported not having health insurance. Families may postpone needed care or accrue medical debt unless Texas enacts Medicaid expansion.
• Over half of Texas renters with children reported lacking confidence in their ability to pay next month’s rent. The American Rescue Plan is an opportunity for cities and states to budget for expanded housing supports.