Poverty typically rises during recessions as employment weakens — but the recession caused by COVID-19 was different both nationally and in California. Based on new California census data, poverty fell sharply from 16.6% in 2019 to 11.0% in 2021 as measured by the Supplemental Poverty Measure (SPM). Conversely, according to official poverty indicators, poverty increased slightly (10.1% to 11.9%). The patterns for the nation as a whole are similar.
Why this discrepancy? A key reason is that the SPM captures cash income from employment; Benefits from the largest cash, housing and food assistance programs; and tax credits – while the official poverty metric only includes cash income.
In the second year of the pandemic, temporary safety net investments led to a steady decline in poverty, particularly among children. Pandemic relief efforts such as stimulus payments, increased safety net benefits, and expanded program eligibility under the 2021 Expanded Child Tax Credit and CalFresh emergency grants played a major role in raising family income above the poverty line. The SPM records these federal investments.
Across all age groups, children experienced a statistically significant decrease in poverty from 2020 to 2021; According to the SPM, child poverty was almost halved within a year – from 12.6% in 2020 to 7.5% in 2021. Although poverty rates for adults (from 15.5% to 11.7%) and senior citizens (from 17 .6% to 14.6%) decreased from 2019 to 2020, the rates for neither group improved further in 2021. This pattern reversed the long-standing ranking of children as the age group with the highest poverty rates.
An encouraging change is that the poverty gap between Latino and white children has narrowed by 31% since 2019. However, the gap remains worryingly wide, with an estimated 9.5% of Latino children living in poverty compared to 3.3% of white children living in poverty.
These estimates show that despite the severe economic disruption caused by the pandemic, government policies can be very effective in reducing poverty. But concerns remain: the government has not always targeted spending at low-income individuals and families, even when that spending has contributed to high inflation. In October, PPIC will release new California Poverty Measure (CPM) estimates for Fall 2021, providing additional insight into the impact of state and federal policies that have dramatically reduced child poverty.