Poverty Rate Soared in 2022 as Aid Ended and Prices Rose

Poverty increased sharply last year in the United States, particularly among children, as living costs rose and federal programs that provided aid to families during the pandemic were allowed to expire.

The poverty rate rose to 12.4 percent in 2022 from 7.8 percent in 2021, the largest one-year jump on record, the Census Bureau said Tuesday. Poverty among children more than doubled, to 12.4 percent, from a record low of 5.2 percent the year before. Those figures are according to the Supplemental Poverty Measure, which factors in the impact of government assistance and geographical differences in the cost of living.

The increases followed two years of historically large declines in poverty, driven primarily by safety net programs that were created or expanded during the pandemic. Those included a series of direct payments to households in 2020 and 2021, enhanced unemployment and nutrition benefits, increased rental assistance and an expanded child tax credit, which briefly provided a guaranteed income to families with children.

Nearly all of those programs had expired by last year, however, leaving many families struggling to stay ahead of rising prices despite a strong job market and improving economy.

One pandemic program that did not expire was a temporary freeze in Medicaid terminations, a move that allowed the program to cover more Americans than ever. Because of that program, the share of Americans without health insurance matched a record low last year of 7.9 percent. But states are unwinding that temporary coverage, and the uninsured rate has probably increased in recent months.

The increasing cost of living added to the challenge last year. The poverty threshold, which is based on the cost of essential items like food and housing, rose sharply: A family of four living in a rental home was considered poor under the supplemental measure if the family’s income was less than $34,518 in 2022, up from $31,453 in 2021.

Higher prices didn’t just hit the poor. Median household income, adjusted for inflation, fell 2.3 percent in 2022, to $74,580, as the fastest inflation since 1981 overwhelmed the impact of increased employment and rising wages.

“People are working hard,” said Margaret O’Conor, who runs Common Pantry, a small food bank in Chicago. “They’re just not making ends meet, the cost of living is too much.” Rent in particular has soaked up a lot of people’s extra earnings.

Common Pantry, like many food banks, had demand explode during the pandemic and then recede in 2021, when people received stimulus checks, enhanced unemployment benefits and the child tax credit, among other assistance. Then, as those programs lapsed, demand began to climb again.

“2022 just threw us,” Ms. O’Conor said. “We were not expecting it. I don’t think any food pantry was really expecting it.”

The White House, in a blog post previewing the report, argued that more recent data “tell a more optimistic story.” Inflation has cooled in recent months, while the job market has remained strong and wages continue to rise.

The hot job market has had clear benefits for those able to take advantage of it. Many workers, especially in low-paying industries like hospitality and retail, experienced significant wage gains in 2022, in some cases by moving between jobs in search of better pay. Income for the poorest 20 percent of households — excluding tax credits and some other government benefits — rose 4.3 percent last year, adjusted for inflation. Income gains also outpaced inflation for the least educated workers.

Inequality, as measured by the ratio between the richest and poorest 10 percent of households, narrowed, as most of the decrease in median incomes came from those at the middle and top of the wage distribution. Racial gaps also shrank, as white households lost ground to inflation, while inflation-adjusted income was little changed for other racial and ethnic groups.

The “official” poverty rate — an older measure that is widely considered outdated because it excludes many of the government’s most important anti-poverty programs, among other shortcomings — was nearly flat last year, at 11.5 percent, reflecting the offsetting forces of higher prices and increased earnings of low-wage workers. By that measure, the poverty rate for Black Americans was 12.4 percent, the lowest rate on record.

“There has really been this resurgence in terms of the labor market fortunes of Black workers, particularly Black male workers,” said Michelle Holder, an economist at John Jay College in New York. “The most important element for people in my community is can we get a job, and if we can get a job, can we keep a job? And right now, both things look pretty darn good.”

But those unable to work, or unable to work full-time, faced a one-two punch of higher costs and lost benefits in 2022 — problems that have continued this year. Increased federal nutrition benefits, one of the last vestiges of pandemic aid efforts, expired last spring.

“Tight labor markets are incredibly powerful, they’re really important, but they’re not sufficient,” said Elisabeth Jacobs, a senior fellow at the Urban Institute.

When a high-risk pregnancy forced Amber Summers to leave her job in rural Southern Illinois in 2021, the expanded child tax credit provided a lifeline. The $250 monthly payments helped cover her mortgage and allowed her son, now 9, to play Little League Baseball for the first time.

“It was financial stability and stress relief for our family,” she said.

But when the payments lapsed at the end of 2021, the family’s finances quickly unraveled — especially after Ms. Summers’s husband, Tim, contracted Covid and lost his job as a cook. And while both of them have since returned to work, neither is receiving full-time hours, and they are falling further behind on their bills. Opportunities for better-paying jobs are limited in their area.

“The child tax credit helped pull our family out of poverty for such a short period of time,” Ms. Summers, 32, said.

Congress passed the expanded child tax credit as part of the American Rescue Plan, President Biden’s pandemic-relief package, in early 2021. But unlike with other Covid-era relief programs, which were always intended to expire once the emergency passed, supporters hoped to make the expanded child credit permanent.

That didn’t happen. Faced with united opposition from congressional Republicans as well as some conservative Democrats, Mr. Biden dropped his effort to extend the program at the end of 2021; a renewed push failed again last year. The rise in poverty in 2022, social policy experts said and the White House agreed, was the inevitable result of that decision.

Critics of the child tax credit and other pandemic aid have argued that the rapid rebound in poverty after the programs’ expiration is evidence that the progress made against poverty in recent years was, in effect, artificial. Michael Strain, an economist at the conservative American Enterprise Institute, argued that programs that offer incentives to work — such as the earned-income tax credit and the standard child tax credit — have led to more sustainable gains.

“Yes, this alleviated child poverty, but it didn’t really do a whole lot to encourage self sufficiency,” he said.

Progressives take a different lesson: Government programs can succeed in helping families meet their basic needs, but only as long as they remain in place.

“The last few years just illustrated in an incredible way the power of effective government intervention,” said Arloc Sherman, a vice president at the Center on Budget and Policy Priorities, a progressive research organization. “The last couple years, through a plunge in poverty and what is now a record single-year increase in poverty in 2022, have shown that poverty is very much a policy choice.”

Margot Sanger-Katz contributed reporting.

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