The 2021 Census Bureau reports on income and poverty provide a first official glimpse at the economic condition of U.S. households by race and ethnicity in the first full year of the COVID-19 economic recovery, which reached people of color much faster than the recovery from the Great Recession.  

The faster pace of this recovery can be attributed to the strong pandemic policy response that not only contributed to robust job growth throughout 2021, but also provided critical income supports to economically vulnerable families and children.

However, along with these positive outcomes came a spike in inflation that threatened to chip away at any income gains. As a result, in 2021, real median household income ($70,784) was not statistically different from 2020 ($71,186). Real median household income was also statistically unchanged across all racial and ethnic groups. Reported income estimates reflect the Census Bureau’s inflation adjustment for 2021 – an annual increase of 4.7% between 2020 and 2021 and the largest annual increase since 1990. While this suggests that median incomes essentially kept pace with the 2021 rise in prices, these estimates do not reflect the more rapid increase in inflation in 2022.   

Comparisons of 2020 and 2021 income estimates to earlier years should be made with caution as Census reports that “since 2020, survey nonresponse has continued to bias income statistics upward by about 2%” due to much lower response rates among low-income households since the pandemic. Further, in an attempt to “mitigate nonresponse bias based on age, sex, race, and Hispanic origin and ensure that the weighted sample is representative of the U.S. population,” both 2020 and 2021 data have been (re)weighted using decennial census population controls and will not match estimates published last year.   

All caveats aside, relative racial and ethnic disparities in median household income remained unchanged during the 2020-2021 pandemic years, as shown in Figure A. In 2021, Asian households reported the highest median income ($101,418), followed by non-Hispanic white households ($77,999). Incomes remained much lower among Hispanic (from $57,981) and Black households ($48,297). Relative to every dollar of white household income, Hispanic and Black households earn just 74 cents and 62 cents, respectively.  

The impact of the pandemic was most clearly reflected in the historic single-year decline in full-time, year-round employment in 2020. After falling by 13.7 million in 2020, the number of full-time, year-round workers increased by 11.1 million in 2021. This indicates a significant shift to more full-time year-round work since the total number of workers was unchanged.  

Due to systemic and structural inequalities in the labor market, the 2020 losses in full-time, year-round employment were largely borne by lower earners who were disproportionately women and men of color.  

As shown in Figure B, in 2021, the number of full-time, year-round earners rebounded most significantly among those same groups. The number of full-time year-round earners increased 21.1% among Hispanic men and 17.8% among Hispanic women. The corresponding changes for Black men and women were 15.4% and 10.8%, respectively. White, non-Hispanic men and women saw increases of 8.4% and 8.8%, respectively.  

The 2021 official poverty rates remained largely unchanged between 2020 (11.4%) and 2021 (11.6%). As seen in Figure C, official poverty rates either rose slightly or remained unchanged for all racial and ethnic groups. The Black poverty rate was highest at 19.5% (statistically unchanged from 2020 at 19.6%), followed by the Hispanic (17.1%, up 0.1 percentage points), Asian (9.3%, up 1.2 percentage points), and white (8.1%, down 0.1 percentage points) poverty rates.  

In 2020, Black and Hispanic children continued to face the highest poverty rates—27.6% of Black children and 23.1% of Hispanic children under age 18 lived below the poverty level. In 2021, Black children saw a slight decline in poverty by 0.3 percentage points (to 27.3%) and Hispanic children saw a decline in poverty by 0.7 percentage points (to 22.4%). Despite the decline in child poverty rates, Black children were nearly three times as likely to be in poverty as white children (8.8%), and 8.8% of Asian children lived in poverty in 2021.  

The Supplemental Poverty Measure (SPM), an alternative to the long-running official poverty measure, provides a more accurate measure of a household’s economic deprivation. While the official poverty rate captures only before-tax cash income, the SPM accounts for various non-cash benefits and tax credits. The SPM also allows for geographic variability in what constitutes poverty based on differences in the cost of living.  

The 2021 SPM reveals the extent to which various safety net programs mitigated the worst effects of the pandemic recession, particularly for Black and Hispanic households. While the official poverty measure shows 19.5% of the Black population in poverty, the SPM shows only 11.2%, a difference of 8.3 percentage points. The SPM shows a lower poverty rate in the Hispanic population as well, 11.2% compared to 17.1% in the official poverty measure. The non-Hispanic white and Asian populations saw smaller differences between their SPM and official poverty rates (5.7% vs 8.1% for whites, 9.5% versus 9.3% for Asians).  

The substantial reduction in poverty captured by the SPM reveals how important the investments in pandemic relief were to some of our nation’s most vulnerable communities, including Black and Brown children. Notably, the expanded Child Tax Credit significantly reduced child poverty for all groups, keeping nearly 3 million children out of poverty. We have the capacity to significantly lower poverty rates through progressive policy and should not wait for another global pandemic to do so.