It Is Time for an Official Measure of Economic Well-Being

Today the U.S. Census Bureau released its annual statistics on income, poverty, and health insurance. The data are from 2019, a time which must feel very distant for many families as they send their children back to virtual school, mourn the loss of loved ones, and struggle to put food on the table as they navigate the ongoing coronavirus pandemic.

Over the last several months, nationally representative surveys have documented the devastating health and economic consequences of the pandemic and highlighted how it has exacerbated longstanding racial and economic inequalities. We know that in the first weeks of the pandemic, four in 10 parents reported that they or someone in their family lost work or work-related income because of the coronavirus outbreak, and the proportion rose to five in 10 Black parents and more than six in 10 Latinx parents. Material hardship was widespread. By mid-summer, more than one in four of all children lived in households that were behind on rent or mortgage and or did not have enough to eat. More than four in ten Black children and just under four in ten Latino children were living in such households. Among families with children under five, the patterns of material hardship were similar, and caregivers whose families were experiencing hardship reported high levels of emotional distress—including stress, anxiety, depression, and loneliness—for themselves and their children. Immigrant and Indigenous communities’, whose experiences are not always captured in these larger surveys, have particularly struggled under the weight of the economic and health crises.

The data released today paint a picture of families’ economic circumstances before the pandemic, and hint at the policy shortcomings and systemic inequities which help explain why the pandemic has taken such a heavy toll on Black and Latinx families in particular. According to the data, in the last year of a more than decade-long economic expansion, median incomes rose and the number of people living in poverty fell, but enormous disparities by race and ethnicity persisted. Using the Supplemental Poverty Measure, which takes into account cash and non-cash transfers as well as certain expenses, an estimated 11.7 percent of people overall had income and resources that fell below the poverty threshold in 2019, which was just under $29,000 a year for a family of four who rented their home. Black and Hispanic people had significantly higher SPM poverty rates than other groups, at 18.3 percent and 18.9 percent respectively, and an unacceptably large share lived with incomes below half of the poverty threshold—5.9 percent and 4.9 percent respectively. Even when the economy was purportedly strong, it was still not working for many families of color, and social safety net supports were not doing enough to increase the income and resources of families of color in particular.

From the data released today we also learn that on the eve of the pandemic the number of people without health insurance was rising, likely due to the Trump administration’s continued to attacks on the Affordable Care Act and Medicaid, and its anti-immigrant policies that have had a documented chilling effect on immigrant families’ access to health insurance and other foundational supports. The share of children who are uninsured saw an especially disturbing uptick, increasing to 5.7 percent overall, and 9.2 percent for Hispanic children. The health insurance and poverty data together point to gaping holes in our most basic supports and services—holes that systematically disadvantage Black and Latinx children and families and leave them with limited resources to meet their most basic needs.

It is striking, however, that the data released today do not tell us more. We collect data on poverty in order to understand how families are faring, and whether policy is working. When the United States first developed an official poverty measure, it was in the context of the Johnson administration’s War on Poverty. The administration adopted the measure in order to better understand the problem it sought to solve, and to track progress. The official poverty measure has proven valuable in monitoring longer term trends in the share of families with the lowest incomes, and improvements to the poverty measure, particularly with the introduction of the SPM in 2011, has helped us understand how certain policy interventions are working to increase families’ income and resources. From the SPM we learn that Social Security lifts the most people above the poverty thresholds, including approximately 26.5 million in 2019, the vast majority of whom are over 65. Refundable tax credits, including the Earned Income Tax Credit and the Child Tax Credit, are a distant second—lifting a total of 7.5 million people above the poverty thresholds.    

But the picture of families’ economic well-being that emerges from these poverty measures remains one-dimensional and abstract. As measures of income and resources, they do not necessarily capture whether families are, in fact, meeting their basic needs. For example, the material hardships that are generally associated with poverty, such as difficulty paying for food and rent, are prevalent among families with incomes well above the poverty line. As annual measures, moreover, they do not capture families’ whose incomes fall below the poverty thresholds for weeks or months at a time, but average above the thresholds over the course of the year. Research has shown that a large share of families experience income volatility that causes their income to at times fall below the poverty line, which can cause extreme hardship, even as their average annual incomes are relatively high. Black and Hispanic households are most likely to face high income volatility. Finally, these measures tell us nothing about whether families’ income and resources are allowing them to lead happy and healthy lives. These shortcomings stand in stark contrast to the rich data we are seeing come from surveys conducted during the pandemic, which chart in regular intervals families’ material hardships; their experiences accessing work, child care, education, transportation, and more; and their physical and emotional well-being.

The larger problem with our poverty measures is that they set our policymaking sights too low. We continue to use these measures as a benchmark for measuring the success of social policy. If a particular policy lifts families’ income and resources above the poverty line, we have a tendency to deem it successful. We know that today, too few of our basic supports even do that. But for those that do, we know that families who benefit from them still often struggle to afford housing and child care and other basic needs, and remain under constant stress that limits their ability to plan for their future. Our goal should be to develop policies that allow families who have been systematically disadvantaged by historical policy decisions to not only to meet their basic needs, but live full lives in which they can participate in their communities and achieve their goals.

Fundamentally, our current poverty lines are far too low. But they are also unable to capture what it means for families to achieve economic security and well-being. We need tools that allow us to better appreciate families’ economic circumstances, so that we can develop policies to support them and track progress over time. We need an official measure of economic well-being.