The U.S. government will likely report in September 2022 that for 2021 its most accurate measure of child poverty was the lowest on record. This was due, in large part, to generous government benefits. Our research suggests child poverty in 2021 would have been even lower had the government made it easier for families to receive these benefits.
One way the federal government responded to the economic upheaval that accompanied the COVID-19 pandemic was to boost the money Americans got as benefits – and to distribute those benefits to people who didn’t previously get them.
Researchthatwe and other economists have conducted indicates that the share of American children living in poverty fell even further in 2021. One key policy change brought about this decline: The government temporarily expanded the child tax credit, boosting the incomes of nearly all families with children.
We have determined, however, that child poverty would have plunged much more had the government done a better job ensuring that all who qualified got the credit.
The supplemental poverty measure has been consistently lower for children than the official poverty rate since its launch in 2011.
One reason for this is the child tax credit. It began in 1998, with a maximum possible credit of $400 per child. The amount families could get was limited by the income taxes they owed. Since low-income families either don’t pay any income taxes or owe very little, this did them little good. Subsequent reform measures increased both the amount of the credit and made some of this benefit available to families that paid no income tax.
A large federal spending package enacted in 2021 increased the credit further and made it available to all but the wealthiest families with children. Between July 2021 and June 2022, most received up to $3,600 for each child under 6 and as much as $3,000 for kids between the ages of 6 and 17. The Internal Revenue Service distributed half this money in monthly payments between July and December 2021, and the rest at tax time in 2022.
A Columbia University research team that tracks child poverty rates on a monthly basis calculated that the child tax credit expansion reduced child poverty by about 29% in December 2021 compared with what it would have been without the credit. That would translate into 3 million fewer children in poverty.
If confirmed, that would be an extremely positive result. But we estimate that the child poverty rate could have fallen even further had the government ensured that more eligible families received the expanded child tax credit last year.
As we recently explained in the Journal of Post Keynesian Economics, an academic publication, we reviewed detailed 2019 data to estimate what would have happened to child poverty that year had all eligible families received the 2021 tax credit expansion. We found that child poverty would have declined an additional 9 percentage points from what the Columbia team estimated for December, or 38%.
We believe the best explanation for this gap is that many low-income families didn’t file a tax return in 2019 or 2020 because they didn’t owe federal income taxes. To get monthly child tax credits from the IRS, these families needed to file a return.
Alternatively, families could log in to the IRS website and apply for the child tax credit. That was hard to do for many low-income people who lacked internet access.
Lack of awareness
Surveys by a Washington University in St. Louis research team support our theory. It found that 29% of low- and moderate-income Americans knew little or nothing about the child tax credit expansion – or even that they were eligible to receive it.
Specifically, 78% of those surveyed who did not file a 2020 tax return didn’t know much about the credit. Furthermore, some journalists found that the IRS website people must use to apply for benefits when they didn’t file a tax return was not user-friendly, and no Spanish version was available.
These findings suggest that expanding the child tax credit can greatly reduce child poverty. They also point to the need for increased outreach efforts to ensure that all low-income Americans can obtain the benefits for which they are eligible.
We will learn more when the Census Bureau releases its 2021 poverty statistics in September 2022. Based on our estimates and those of other research teams, we expect to see that the child tax credit expansion led to a further sharp decline in the the supplemental poverty rate for children.
If that’s the case, there should be loud calls for this benefit to be restored on a permanent basis.
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The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.
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Child poverty estimates point to a record low in 2021. Here’s how it could have been even lower
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Photo Credit: Nickolay Khoroshkov / Shutterstock
During the COVID-19 pandemic, the U.S. government has pumped unprecedented amounts of financial relief to American households to stave off potential economic disaster. From the expansions of social safety net programs like unemployment insurance and food stamps to multiple rounds of direct payments, Congress’s multiple relief packages over the last year have helped put many households on better financial footing.
Early analysis of these policies indicates that one of the groups benefiting most from these relief efforts is America’s poor. One recent report from the Urban Institute estimated that as a result of these investments, America’s poverty rate will decline to 7.7% in 2021, which would be the lowest rate on record.
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Photo Credit: Nickolay Khoroshkov / Shutterstock
During the COVID-19 pandemic, the U.S. government has pumped unprecedented amounts of financial relief to American households to stave off potential economic disaster. From the expansions of social safety net programs like unemployment insurance and food stamps to multiple rounds of direct payments, Congress’s multiple relief packages over the last year have helped put many households on better financial footing.
Early analysis of these policies indicates that one of the groups benefiting most from these relief efforts is America’s poor. One recent report from the Urban Institute estimated that as a result of these investments, America’s poverty rate will decline to 7.7% in 2021, which would be the lowest rate on record.
Child poverty estimates point to a record low in 2021. Here’s how it could have been even lower
This drop in the poverty rate would represent an acceleration of a more gradual trend that has taken place for the last few years. The poverty rate rose to nearly 16% in the wake of the Great Recession. By 2019, after a steady but slow economic recovery over the previous decade, the poverty rate had fallen to 12.3%. But while the overall trends are promising, this figure still represents approximately 40 million Americans, and poverty hits some populations harder than others.
One of the demographic groups most affected by poverty in the U.S. is children. More than 18% of children under five were in poverty in 2019, while 16.2% of children aged 5–17 were in poverty. Children are unable to work, and their parents face increased costs for expenses like food, housing, and health care, which puts families with children at greater risk of poverty. However, a new expanded child tax credit passed as part of the American Rescue Plan is projected to cut child poverty in half through monthly payments to households with children. At the other end of the spectrum, Americans aged 65 and over—buoyed by long-standing safety net programs like Social Security and Medicare—have the lowest poverty rate of any age group at 9.4%.
This drop in the poverty rate would represent an acceleration of a more gradual trend that has taken place for the last few years. The poverty rate rose to nearly 16% in the wake of the Great Recession. By 2019, after a steady but slow economic recovery over the previous decade, the poverty rate had fallen to 12.3%. But while the overall trends are promising, this figure still represents approximately 40 million Americans, and poverty hits some populations harder than others.
One of the demographic groups most affected by poverty in the U.S. is children. More than 18% of children under five were in poverty in 2019, while 16.2% of children aged 5–17 were in poverty. Children are unable to work, and their parents face increased costs for expenses like food, housing, and health care, which puts families with children at greater risk of poverty. However, a new expanded child tax credit passed as part of the American Rescue Plan is projected to cut child poverty in half through monthly payments to households with children. At the other end of the spectrum, Americans aged 65 and over—buoyed by long-standing safety net programs like Social Security and Medicare—have the lowest poverty rate of any age group at 9.4%.
Child poverty estimates point to a record low in 2021. Here’s how it could have been even lower
Poverty also has a strong racial dimension in the United States. White Americans had a 9% poverty rate in 2019, the lowest of any racial or ethnic category. Meanwhile, American Indians (23%) and Black Americans (21.2%) have the highest poverty rates among racial and ethnic groups, a fact attributable in large part to historical policies that have reduced economic opportunity and limited investment in those communities.
Poverty also has a strong racial dimension in the United States. White Americans had a 9% poverty rate in 2019, the lowest of any racial or ethnic category. Meanwhile, American Indians (23%) and Black Americans (21.2%) have the highest poverty rates among racial and ethnic groups, a fact attributable in large part to historical policies that have reduced economic opportunity and limited investment in those communities.
Child poverty estimates point to a record low in 2021. Here’s how it could have been even lower
Racial and ethnic disparities in poverty rates are also a major reason why poverty is more concentrated in some locations than others. Southern states like Mississippi (19.6% poverty rate) and Louisiana (19.0%), which have higher proportions of Black residents, have some of the highest poverty rates, while states with large American Indian populations, like New Mexico and Oklahoma, are also high on the list. However, race is not the only factor: states with relatively small minority populations, like Kentucky and West Virginia, also exhibit high poverty rates (both around 16%), which are attributable to other variables like economic opportunity and educational attainment.
Racial and ethnic disparities in poverty rates are also a major reason why poverty is more concentrated in some locations than others. Southern states like Mississippi (19.6% poverty rate) and Louisiana (19.0%), which have higher proportions of Black residents, have some of the highest poverty rates, while states with large American Indian populations, like New Mexico and Oklahoma, are also high on the list. However, race is not the only factor: states with relatively small minority populations, like Kentucky and West Virginia, also exhibit high poverty rates (both around 16%), which are attributable to other variables like economic opportunity and educational attainment.
Child poverty estimates point to a record low in 2021. Here’s how it could have been even lower
At the metro level, many of the same factors hold. Locations that have younger populations and more non-white residents tend to exhibit higher rates of poverty, and many of the highest-poverty metros are located in the South. Beyond that, an area’s economic health is a major factor as well: some of the locations with the highest poverty levels are cities that have been hit hard by deindustrialization, such as Cleveland and Detroit.
To find the cities with the highest poverty rates, researchers at Self analyzed data from the Census Bureau’s American Community Survey. Researchers examined poverty rates for all cities with at least 100,000 residents and collected data on both the percentage and number of people living in poverty overall and for children and racial or ethnic minorities.
Here are the cities with the highest poverty rates.
At the metro level, many of the same factors hold. Locations that have younger populations and more non-white residents tend to exhibit higher rates of poverty, and many of the highest-poverty metros are located in the South. Beyond that, an area’s economic health is a major factor as well: some of the locations with the highest poverty levels are cities that have been hit hard by deindustrialization, such as Cleveland and Detroit.
To find the cities with the highest poverty rates, researchers at Self analyzed data from the Census Bureau’s American Community Survey. Researchers examined poverty rates for all cities with at least 100,000 residents and collected data on both the percentage and number of people living in poverty overall and for children and racial or ethnic minorities.
Here are the cities with the highest poverty rates.
Government benefits can reduce child poverty. DBenitostock/Moment via Getty Images, CC BY-NC-ND