by Dr. Kelley Cullen
As economists and policymakers continue to assess the impact of the Covid-19 pandemic, one of the concerns is the possibility of disparate outcomes for lower income households. Fortunately, because of quick and dramatic policy actions in the form of fiscal stimulus and expanded unemployment insurance benefits, many individuals were spared from falling into poverty. This can be seen locally where the share of population living at or below the Federal Poverty Level (FPL) in the combined counties of Chelan & Douglas fell by four percentage points – from 13% to 9% -- in just two years (between 2019 and 2021.) Even better news is that the current share of population in poverty is now below the state average of 10% and well below the national average of 13% at the end of the pandemic.
Chelan Douglas Trends 2.6.1 Total & Share of Population Living in Poverty provides data from the US Census on the estimated number of individuals as well as the share of population living at or below the Federal Poverty Level. The FPL is determined based upon income and need for households. Income is the "incomes of all related family members that live together" and need is the "dollar amounts used to determine poverty status".
In short, poverty thresholds vary since they take into consideration the number of adults living in the household (1 or 2), the total number of dependents, as well as the total household income. If a family's total income is less than the associated poverty threshold, the family is said to be living in poverty. If a family's income is equal to or greater than the associated poverty threshold, the family is not living in poverty. Population groups excluded from poverty estimates are people living in: prisons and nursing homes, college dormitories, military barracks, and the homeless.
Although US Census estimates from the American Community Survey (ACS) were not reported in 2020 due to low response rates during the pandemic, data is available for both counties, the cities of Wenatchee and East Wenatchee as well as for the state and nation from 2005 to 2021.
Taking a little longer look back, since 2005, we can see that the poverty rate for the combined counties has ranged from a high of 16% (2017) to the current low value of 9%. In 2005, the poverty rate according to the FPL was 15% for the combined counties, above the rates for the state (12%) and US (13%). Despite sustained increases in population since 2005 of nearly 75%, the total number of people living in poverty in the combined counties has fallen by over 25%.
The Supplemental Poverty Measures (SPM)
Because the current official measure of poverty fails to consider the value of non-cash benefits such as food stamps, housing subsidies or Medicaid, the US Census Bureau has started tracking a second measure of poverty – the Supplemental Poverty Measure (SPM). This approach adds both cash resources and non-cash benefits from government programs aimed at low-income families but subtracts taxes and necessary expenses. Whereas the method of the official poverty measure has remained mostly unchanged since mid-1960s allowing for lengthy time series analysis, the SPM which began in 2008 was designed to keep pace with changes in data, methods, and new research. In 2017, the SPM was further refined, so comparisons between 2008 and 2017 need to be considered very carefully.
The SPM produces poverty thresholds for various family compositions and further distinguishes between home-owners (both with and without a mortgage) and renters. In 2020, a renting household in the combined counties of Chelan & Douglas with two adults and two children would need an annual income of greater than $26,000 to keep them out of poverty.
For families of four (two adults, two children) who own their own home, those without a mortgage only need an annual income of $23,000 to stay above the SPM poverty threshold, whereas the same family with a mortgage would need an annual income of just under $26,000 – much closer to the income needs of renting families.
Since its inception in 2008, the national poverty rate according to the SPM has typically been higher than the older official poverty rate measure. In part, this is because the SPM also considers taxes and necessary expenses along with non-cash benefits. However, because of the generous injection of fiscal stimulus and expanded unemployment benefits through the pandemic, the share of the population below the poverty line as calculated by the SPM actually dropped below the official poverty measure by about two percentage points on average, nationally.
Although the official data for the SPM’s share of population is not available at the county level, if we assume an average difference between the two poverty rates of 2%, this would imply that the SPM measure of the share of population in the combined counties in poverty during the pandemic could have possibly fallen as low as 7%.
Future poverty in the two counties
Given that the response to the financial challenges of the Covid-19 pandemic and disruptions to economic activity was swift and short-lived, we would expect that the ensuing lower poverty rates in the local community might not continue longer term. Additionally, with higher levels of inflation seen throughout 2022 and still ongoing to some extent, families on the brink of the poverty thresholds might be having a harder time meeting rising expenses.
On the upside, increases in incomes will help to keep some families above the thresholds. In particular, Washington’s inflation-adjusted minimum wage saw an increase of 8.6%, from $14.49 to $15.74, starting in this month. This will be a welcome respite for local families living at or near the current poverty levels.
Ultimately, where the share of population living in poverty for the combined counties falls will depend on how successful federal policy actions are in attempting to rein in inflation and the extent to which local incomes rise in the near future.