Urban Institute earlier estimated that the American Rescue Plan Act, enacted in March 2021, would reduce the 2021 annual poverty rate to 8.7 percent (Wheaton et al. 2021). We now project a 2021 poverty rate of 7.7 percent for 2021.
The revised projection accounts for improvements in the economy, incorporates updated state-level information on pandemic-related policies, and improves the method for weighting the data to reflect 2021.
Both the earlier poverty projections and these updated projections use the Supplemental Poverty Measure, which allows a more comprehensive assessment of families’ economic well-being than the official poverty measure. The projections, developed using the Urban Institute’s Analysis of Transfers, Taxes, and Income Security model, take into account expected levels of employment and income in 2021, safety-net benefits, taxes and tax credits, state “back to work” bonuses, and federal and state stimulus checks.
Key findings include the following:
- Using the Supplemental Poverty Measure, the annual poverty rate projection for 2021 of 7.7 percent is well below the rate of 13.9 percent that we estimate for 2018.
- The projected poverty rate for children is 5.6 percent, for adults ages 18 to 64 it is 8.1 percent, and for people age 65 and older it is 9.2 percent.
- The 2021 poverty rate is projected to be higher for Black, non-Hispanic people (9.2 percent), for Hispanic people (11.8 percent), and for non-Hispanic Asian American and Pacific Islanders (10.8 percent) than for white, non-Hispanic people (5.8 percent).
- The federal stimulus checks have a larger antipoverty impact than any of the other programs; if all other programs were in place but the stimulus checks had not been paid, we project 12.4 million more people would be in poverty in 2021. The Supplemental Nutrition Assistance Program alone keeps 7.9 million people out of poverty in 2021, and unemployment insurance benefits lower the number in poverty by 6.7 million (assuming all other programs are in place).
- The combined benefits have the largest impact on children, reducing their projected 2021 poverty rate 81 percent relative to what it would be without any benefits (from 30.1 percent to 5.6 percent).
- The benefits have the largest impact on Black non-Hispanic people (reducing their 2021 projected poverty rate 74 percent) and the smallest impact on non-Hispanic Asian American and Pacific Islanders (reducing their 2021 projected poverty rate 54 percent).
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