Income inequality in the U.S. widened last year for the first time in more than a decade, but child poverty has been nearly halved due to the federal government’s expanding child tax credit and stimulus payments made in response to the COVID-19 pandemic, according to new survey results that released by the US Census Bureau on Tuesday.
The income inequality index rose 1.2% from 2020 to 2021, the first time the measurement known as the Gini index has risen since 2011, according to a report on the results of the latest population survey.
The decline in household income among the poorest US citizens appears to have driven the widening of income inequality. Households in the 90th percentile of the income distribution, the richest, had 13.5 times more income than households in the 10th percentile, the poorest. That was a 4.9% increase from 2020.
“It’s sensitive to extremes on both ends,” said Liana Fox, an official with the Census Bureau. “This suggests that the decline in real income on the bottom has driven the rise in the Gini index.”
For the most part, there has been little change in median household income from year to year based on demographic characteristics such as race or ethnic background.
However, people in households headed by someone 65 years of age or older, those with only some college education, and households in which family members did not live together saw income declines from 2020 to 2021. One of the reasons was fixed incomes, many seniors have not kept pace with rising inflation in 2021, and many of the “non-family” households were headed by women, whose incomes lagged behind men’s.
Households headed by people with at least a college degree have seen an increase in total income over the past year.
Broken down by race and ethnicity, Asian households had the highest median income in 2021 at $101,418, followed by non-Hispanic whites at $77,999 and Hispanics at $57,981. Black households had a median income of $48,297.
Median income was highest in the West at $79,430 and the Northeast at $77,472, followed by the Midwest at $71,129 and the South at $63,368.
The period in the most recent population survey included the third round of pandemic-related stimulus payments and extensions to the child tax credit, earned income tax credit, and child and dependent care credit. During the survey period, consumer prices also rose by 4.7%, the largest annual increase in the cost of living adjustment since 1990.
The expansion of the Child Tax Credit helped reduce child poverty, as measured by the agency’s Supplemental Poverty Measure, from 9.7% in 2020 to 5.2% last year. It is the lowest since the new measure was introduced in 2009.
“The new data demonstrate the significant impact that expanding poverty-reduction programs during the COVID-19 pandemic has had on reducing child poverty,” the Census Bureau said in a report.
The pandemic-related stimulus has also helped the general population.
The Census Bureau calculates poverty in two ways – the “official” poverty rate and the Supplemental Poverty Measure, which includes government programs to support low-income families. The official poverty rate last year was 11.6%, or 37.9 million people, and it was no different statistically from 2020. The supplementary poverty rate was 7.8% last year, down 1.4 percentage points from 2020 and the lowest in the twelve years it was calculated.
The differences between the two rates are due to the federal government’s pandemic assistance, with refundable tax credit extensions keeping 9.6 million people out of poverty and stimulus payments doing the same for 8.9 million people, the Census Bureau report said.
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