Poverty typically rises during recessions as employment weakens—but the COVID-19-induced recession has been different, both nationally and in California. Based on new census data for California,  poverty fell sharply from 16.6% in 2019 to 11.0% in 2021, as determined by the Supplemental Poverty Measure (SPM). Conversely, poverty rose slightly (10.1% to 11.9%) according to official poverty metrics. Patterns for the nation as a whole are similar.

Why this divergence? A key reason is that the SPM captures cash income from employment; benefits from the largest cash, housing, and nutrition assistance programs; and tax credits—while the official poverty metric encompasses just cash income.

During the second year of the pandemic, temporary safety net investments drove a continued decline in poverty, especially among children. Pandemic relief measures such as stimulus payments, increased safety net benefits, and expanded program eligibility under the expanded 2021 federal Child Tax Credit and CalFresh emergency allotments played an important role in lifting family incomes above the poverty line. The SPM captures those federal investments.

Across age groups, children saw a statistically significant decline in poverty from 2020 to 2021; child poverty was cut nearly in half over a year—from 12.6% in 2020 to 7.5% in 2021, according to the SPM. Although poverty rates did decline from 2019 to 2020 for adults (falling from 15.5% to 11.7%) and seniors (from 17.6% to 14.6%), rates did not improve further for either group in 2021. This pattern resulted in a reversal of the longstanding ranking of children as the age group with the highest poverty rates.

An encouraging change is that the poverty disparity between Latino and white children has narrowed by 31% since 2019. However, the gap remains troublingly large, with an estimated 9.5% of Latino children in poverty, compared to 3.3% of white children in poverty.

These estimates show that, despite the severe economic disruptions prompted by the pandemic, government policy can be highly effective in reducing poverty. But concerns remain: the government has not always specifically targeted spending to low-income individuals and families, even as this spending has contributed to high levels of inflation.  In October, PPIC will post new California Poverty Measure (CPM) estimates for fall 2021 that give additional insights into impacts of state and federal policy measures that have reduced child poverty dramatically.