Off the Charts Blog | Center on Budget and Policy Priorities

As our analysis of the new poverty data for 2009 points out, poverty may be even higher in 2010 and 2011 than in 2009.

The main reason is that forecasters are predicting continued weakness in the employment market, with the annual unemployment rate rising from 9.3 percent in 2009 to at least 9.5 percent in 2010 and declining only slightly to 9.0 percent or higher in 2011. Moreover, in the last three recessions, the poverty rate didn’t begin falling until a year after the annual unemployment rate started to fall — which means poverty remained elevated for several years, as the graph shows.

Also, while unemployment insurance kept millions of Americans out of poverty in 2009 (and presumably will do so in 2010 as well), it will be less effective against poverty in 2011 if Congress allows the extra weeks of benefits for the long-term unemployed to expire this November.

The Census Bureau data for 2009 reflect the severity of the recent recession, as poverty rose sharply and the number of uninsured spiked. The new figures somewhat overstate the rise in poverty, however, because they do not count the bulk of direct assistance that the 2009 Recovery Act provided to households, which kept millions of Americans from falling into — or deeper into — poverty (as a broader measure of poverty that Census will release later this year is sure to show).

Both the number and percentage of Americans in poverty climbed. The number of poor people rose by 3.7 million, to 43.6 million. The percentage of people in poverty rose from 13.2 percent to 14.3 percent.

These increases reflect the deep recession and the unusually large amount of long-term unemployment. The number of jobs dropped by more than 8 million between the start of 2008 and the end of 2009. (More than half of that loss — 61 percent — occurred before President Obama and Congress enacted the Recovery Act in February 2009.) In addition, by late 2009, the share of unemployed workers who had been out of work for more than six months topped 40 percent, a record for modern recessions. The longer people are out of work, the more likely that they will fall into poverty.

Poverty would have risen much higher without the temporary expansions in unemployment insurance benefits provided by the Recovery Act and other legislation. In 2008, unemployment benefits kept 900,000 Americans out of poverty. In 2009, by contrast, unemployment benefits kept 3.3 million Americans out of poverty, an analysis of today’s data shows. The majority of the increase in UI benefits in 2009 came from the Recovery Act.

Moreover, most Recovery Act assistance is not reflected in today’s numbers. That is, the Census Bureau counts unemployment benefits in the official poverty data. However, the official poverty figures do not count tax credits or non-cash benefits as income — and as a result, do not reflect the poverty-reducing impact of the Recovery Act’s substantial increases in tax credits for low-income working families and food stamp benefits. A broader poverty measure that Census will issue later this year, which most analysts favor and which counts these benefits, will almost certainly show a considerably smaller — although still quite substantial — increase in poverty in 2009. In fact, the Census Bureau said today that food stamp benefits lifted out of poverty 3.6 million people shown as poor in the official poverty figures, while refundable tax credits lifted from poverty 4.2 million people shown as poor in the official data.

Poverty Likely to Climb Higher Next Year

Poverty will likely remain very high in 2010 and climb even higher in 2011. The Congressional Budget Office, the White House Office of Management and Budget, and the Blue Chip consensus forecast peg the expected average unemployment rate in 2011 at a high 9.0 to 9.3 percent. And in each of the past three recessions, poverty did not begin to fall until a year after the unemployment rate began to fall.

Furthermore, key forms of federal assistance — including additional weeks of unemployment benefits for the long-term unemployed and a temporary program that has created 250,000 mostly private-sector jobs for low-income parents and youth — are slated to expire by the end of this year. If Congress fails to extend these measures and unemployment remains high, poverty and hardship almost certainly will climb still higher next year.

Increase in the Uninsured and Its Implications

The number and percentage of Americans without health insurance rose sharply in 2009. The number of uninsured jumped by 4.3 million, to a total of 50.7 million. The percentage of Americans without coverage rose from 15.4 percent to 16.7 percent, which means one of every six Americans was uninsured last year. These are the sharpest year-to-year increases since the Census Bureau began collecting these data in 1987.

The new data show a striking divergence between declines in private insurance and expanded coverage through federally supported programs. The number of people with private insurance plunged by 6.5 million last year, driven by a drop in employer-based coverage; 66.7 percent of Americans had private coverage in 2008 but only 63.9 percent did in 2009. In contrast, the percentage of people with Medicaid coverage rose from 14.1 to 15.7 percent. Without that expansion, the increase in the number and percentage of people who are uninsured would have been much larger.

Data by age tell the same story. The percentages of children and elderly people — the main groups covered by Medicaid, the Children’s Health Insurance Program (CHIP), and Medicare — lacking coverage did not increase. By contrast, the percentage of people aged 18-64 without insurance rose substantially.

In short, the increase in the ranks of the uninsured would have been substantially greater if not for Medicaid and CHIP, which covered more people as the number of people lacking employer-based insurance swelled. These findings underscore the relevance of the recently enacted health reform law, which substantially expands coverage for people who cannot obtain insurance through an employer. Had health reform been in place in 2009, the number of people without health insurance would have risen far less.

UPDATE:  Listen to the audio of today’s Media Briefing here.

Today’s Census Bureau report shows that the number and share of Americans without health insurance rose by 4.3 million and 1.3 percentage points, respectively — the largest single-year increases on record on data that begin in 1999.

The increases were driven by a decline in private health coverage resulting from large reductions in employer-based coverage, which have been occurring for a number of years but accelerated sharply in 2009. Just 58.9 percent of the non-elderly population had employer coverage in 2009, compared to 67.8 percent in 1999.

Only a significant growth in Medicaid coverage (and other smaller government-funded or subsidized health care programs) prevented a much larger increase in the number of uninsured, as the graph shows. The percentage of non-elderly Americans with coverage through Medicaid rose from 14.9 percent in 2008 to 16.6 percent in 2009.

While the share of working-age adults lacking coverage went up, the share of children lacking coverage didn’t, thanks to a large increase in the number of children covered through Medicaid and the Children’s Health Insurance Program. The different outcomes for children and adults illustrate the importance of health reform, which will give adults much of the improved access to affordable coverage through both private and public health care programs that children already enjoy.

• The Affordable Care Act will expand Medicaid eligibility to cover low-income adults with incomes up to 133 percent of the poverty line (roughly $29,000 for a family of four in 2010), starting in 2014.
• The law also calls for the creation of health insurance “exchanges” in all states to give individuals and small businesses a choice of affordable private health plans. People who can’t get affordable coverage through their employer and have incomes too high to qualify for Medicaid and the Children’s Health Insurance Program (but below 400 percent of the poverty line) will qualify for tax credits to help them afford coverage in the exchanges.

The Congressional Budget Office estimates that by 2019, these provisions will enable 32 million otherwise-uninsured Americans to obtain health coverage. Had these provisions been in effect in 2009, the increase in the number of uninsured Americans would unquestionably have been much smaller.

The headline story in today’s Census Bureau report is the large jump in the poverty rate in 2009. But an exclusive Center on Budget and Policy Priorities analysis of the new survey data shows that unemployment insurance benefits — which expanded substantially last year in response to the increased need — kept 3.3 million people out of poverty in 2009.

In other words, there were 43.6 million Americans whose families were below the poverty line in 2009, according to the official poverty statistics, which count jobless benefits as part of families’ income. But if you don’t count jobless benefits, 46.9 million Americans were poor.

Unemployment insurance benefits usually keep more people out of poverty during recessions than during expansions, partly because recessions swell the ranks of jobless workers seeking help and because the government typically offers extra weeks of help in a recession. But they had a much bigger poverty-fighting impact in this recession than in the previous three recessions:

• From 2007 to 2009, the number of people that unemployment insurance kept out of poverty rose by 2.8 million or 581 percent.
• In the previous two recessions (in 2001 and the early 1990s), the number protected from poverty never rose more than 1 million or 209 percent.

Why? Total unemployment benefit payments increased by fully $78 billion (154 percent) in 2009, reflecting both a massive influx of laid-off workers qualifying for help and temporary changes made to the program in the 2009 Recovery Act and other legislation. The Recovery Act raised jobless benefits by $25 per week (the increase expired June 2) and, together with other legislation, gave additional weeks of benefits to long-term jobless workers.

We’ll have more soon on the Census Bureau’s new health insurance data.

We sat down with Arloc Sherman, Senior Researcher, to discuss what to look for in the Census Bureau’s upcoming release of data on poverty in 2009.

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Arloc, tomorrow, the Census Bureau will release official data on national poverty, income, and health insurance coverage in 2009.  Let’s focus on poverty.  How does the Census Bureau define poverty?

The official poverty definition accounts for cash income before taxes. So it includes earnings and government cash benefits like unemployment benefits for jobless workers. It does not include tax credits or noncash benefits (such as public housing or food stamps). In 2009, a family of four was considered below the poverty line – or officially “poor” – if their cash income was less than about $22,000.

What do you expect the poverty data for 2009 to show?

We expect a large increase for 2009 in both the number of Americans in poverty, and the share of the population that were living in poverty. This is a reflection of the effects of the severe recession and the unusually large amount of long-term unemployed workers. The longer people are out of work, the more likely they are to fall into poverty. The increase in poverty may even be among the largest single-year increases in many years.

Earlier, you mentioned that the poverty definition excludes non-cash income like food stamp benefits. Weren’t those significant parts of the Recovery Act of 2009 that were intended to lessen the harmful effects of the recession? How do we regard the Census poverty data if it’s missing a large share of the government’s anti-poverty efforts?

You’re right. The Census numbers released on Thursday will leave out tax credits and non-cash assistance, which make up the majority of the help to families under the 2009 Recovery Act. However, a broader definition of poverty is due out at the end of the year. It’s called the Supplemental Poverty Measure, and Census plans to unveil a preliminary version of it, and it will include tax credits and food stamps and other non-cash benefits. The new measure will do a better job of showing how the Recovery Act has helped mitigate the true rise in poverty over the course of the recession.

Will this new measure show that poverty in the country isn’t really that dire?

Actually, it is still quite dire. It’s just that poverty hasn’t necessarily risen as much as the official numbers will show. Moreover, there is an even darker cloud looming on the horizon: The Recovery Act provisions that have proven so successful in shielding people from deeper poverty levels are set to expire at the end of this year. That means this extra help will evaporate, and assuming the labor market is as troubled as the predictions forecast, poverty could go even higher.

What should policymakers do?

Congress can take three key steps:

• One: Extend the unemployment benefits for the long-term unemployed, which are due to expire November 30
• Two: Extend the child tax credit for lower-income working families with children. The Recovery Act broadened that to cover more families, so don’t let that run out.
• Three: Extend a highly successful little jobs program called the TANF Emergency Fund, which has placed a quarter of a million people in jobs and is set to expire at the end of September.

You can download a podcast of this conversation here or on iTunes.