Material Hardship and Well-Being of U.S. Households in 2022
By Patrick Cooney and H. Luke Shaefer
For the past two years, we have reported on rates of material hardship experienced by U.S. households, to better understand the economic impacts of the COVID-19 pandemic and government aid efforts. Over this period, the federal government passed and implemented a set of unprecedented and robust cash-based safety net measures – most notably expanded unemployment insurance (UI), a series of economic impact payments (EIPs), and the expanded child Tax Credit (CTC)— to support U.S. households during a period of widespread joblessness and economic uncertainty. In large part because of these measures, U.S. households, and households with children in particular, were in a better financial position in 2020 and 2021 than in 2019. In 2021, the child poverty rate, as measured by the SupplementalPoverty Measure (SPM), fell to 5.2%, the lowest rate on record, representing a nearly 60% decline since 2019.
Despite rising inflation in the final months of 2021, data suggest U.S. households remained in a relatively solid financial position through the end of that year, with credit scores and inflation-adjusted bank balances higher than historical averages, and stable rates of material hardship. However, through the first half of 2022, U.S. households have faced rising prices while Congress allowed the final element of the pandemic safety net – the expanded Child Tax Credit – to expire in January.
This brief returns to our consistent set of material hardship and financial well-being measures, to see how American households are faring in the face of rising prices and the full withdrawal of pandemic safety-net supports. We find rates of material hardship have increased throughout 2022, particularly sharply in June and July. Rates of food insufficiency and financial instability for low-income adults are now higher than at any other point during the pandemic, with one-third of low-income adults reporting sometimes or often not having enough food in the prior seven days, and 41% of this group reporting that it was very difficult to pay for basic household expenses. The gap in the food insufficiency rate between households with children and those without—which narrowed significantly in the latter half of 2021 while the expanded Child Tax Credit was in effect—has widened back near pandemic highs. Inflation-adjusted checking account balances for low-income households, while still above 2019 levels, are now well below their 2021 peak. Average credit scores, though still relatively high, have stagnated, in contrast to the year-to-year increases we have seen over the past decade, and the sharp improvements we saw in 2021.2 These signals of financial distress are present despite an unemployment rate that has sat below four percent since February 2022.
Throughout the pandemic, we have seen rates of material hardship in U.S. households fall or rise in tandem with government action or inaction, and have argued that policymakers should closely watch measures of material hardship, and respond accordingly. Most importantly in this regard, after seeing historic progress against child poverty in 2021, the metrics we track suggest these gains are reversing in 2022. Reinstatement of the expanded Child Tax Credit could go a long way towards reducing hardship faced by U.S. households with children, and ensuring the financial gains many households experienced during the pandemic are not lost.
- In August 2022, rates of material hardship were at or near pandemic highs
- Rates are particularly high for low-income adults, and adults with children
- Inflation-adjusted bank account balances are down from 2021 highs, but remain above 2019 levels
- Well-designed cash transfer can help relieve hardship without meaningfully contributing to inflation