Data released by the U.S. Census Bureau via the Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC) this week shows that income inequality in the nation has increased. Based on the Gini index, which measures how evenly income and income growth is distributed across the population, income inequality increased nationally by 1.2% for the first time since 2011. This increase in income inequality was primarily due to declines in income at the bottom of the income distribution. In other words, the drive to increased economic inequality comes from a decrease in household incomes for lower-income communities. In 2021, 10% of the households in the lowest percentiles had median incomes of $15,660 compared to $16,386 in 2020. This is a 4% decline in income for the least advantaged.
In light of the growth in income inequality, the ASEC also provided estimates for how the Child Tax Credit has contributed to a decline in child poverty since 2020. The 2021 American Rescue Plan Act (ARPA) included an expansion that increased the value of the Child Tax Credit from $2,000 to $3,600 for children 6 years and younger and $3,000 for children between the ages of 6 and 17, which lifted nearly 3 million children out of poverty. Child poverty, measured by the Supplemental Poverty Measure (SPM) declined 46% from 9.7% in 2020 to 5.2% in 2021..
The SPM measures the impact of anti-poverty programs, such as Social Security, refundable tax credits, the Supplemental Nutrition Assistance Program (SNAP), the National School Lunch Program, and more, which help people stay out of poverty. The SPM is an important measure because it allows us to gauge the extent to which tax credits and non-cash benefits alleviate poverty.
According to the SPM, Texas has higher rates of both childhood and adult poverty than the national average. Texas’ supplemental poverty rate average for 2019-2021 is 10.4% (3 million people), which is higher than the national average of 9.6%. The rate for Texas children living in poverty is slightly higher than the national average — at 10% — for the same time period, making it the 8th highest in the country.
The official poverty measure, on the other hand, measures gross before-tax cash income and has been collected since 1959. The official poverty measure does not include tax credits, stimulus payments, or non-cash assistance. In Texas, the 2019-2021 three-year average for the state’s official poverty rate was 12.9% (3.7 million people), which was the same as the three-year average for 2018-2020. Texas continues to have a worse poverty rate than the national average, with the U.S. official poverty rate at 11.2%. Only eleven states have higher poverty rates than Texas (Alabama, Arkansas, the District of Columbia, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, Oklahoma, South Carolina, and West Virginia).
For the first time this year, the ASEC included poverty estimates for American Indian and Alaska Natives (AIAN) and populations identifying with two or more races. Across all racial and ethnic categories, only the Asian population saw increased poverty rates in 2021.
In Texas, the 2021 Youth Risk Behavior Survey, which is administered to young adults, demonstrated a similar trend for Asian populations in Texas, with this group having the highest (38%) rate of students who reported that a parent or other adult in the home lost a job during the COVID-19 pandemic. This signals the need for strategic investments in communities that have experienced significant economic impacts from the pandemic. Hispanic/Latino students had the second highest rate (34%) for the same question.
The U.S. as a whole did not experience a statistically significant change in median income from 2020 to 2021. The real median household income was $70,784 in 2021 and $71,186 in 2020. The ASEC reports that median incomes were highest in the West ($79,430) and lowest in the South ($63,368), which includes Texas. Nationally, there was a shift from part-time or part-year work to full-time or year-round work of 11.1 million workers. Many of these jobs were added to the lower half of the earnings distribution. Inflation, undoubtedly, challenged individuals and families and suppressed nominal gains in earnings across the country.
The ASEC provides clear evidence of which policies are working and which policies are not. Poverty rates were buffered by unemployment supplements, SNAP expansion, the Earned Income and Child Tax Credit, housing subsidies, and other anti-poverty programs. In 2020 and 2021, the Extended Child Tax Credit lifted 5.3 million people out of poverty. The Center on Budget and Policy Priorities estimates that in absence of the expansion, child poverty would have fallen to 8.1%, instead of 5.2%.
Disaggregated by racial and ethnic categories, the support that the Child Tax Credit provided for Black non-Latino children was significant. Poverty rates among Black children decreased from 25% in 2009 to 8.3% in 2021. Hispanic/Latino children also saw significant decreases in poverty rates due to the Child Tax Credit, from 29.1% in 2009 to 8.4% in 2021. Poverty rates among Asian children also declined from 18.3% in 2009 to 5.1% in 2021. These SPM measures show the promise of programs in preventing childhood poverty, which we know impacts educational attainment. In fact, the ASEC also provides information on real median household income for householders by educational attainment levels. Householders with more education had higher incomes. From 2020 to 2021, income for households with some college education declined by 4.0% compared to a 2.7% increase in median household income for householders with a Bachelor’s degree or higher.
The hardships of the last two years have hit Texans of color the hardest. However, we cannot deny that the structural inequities in our economic and institutional systems carry the legacy of discrimination from the inception of the nation. Therefore, the Texas Legislature must enact policies that will eliminate economic disparities and create equitable opportunities for every Texan. This means that legislators must equitably fund schools, expand social service programs such as Medicaid, and provide better funding to existing programs to lift people out of poverty and improve economic conditions for all.