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By H. Luke Shaefer

Introduction

In response to the COVID-19 pandemic, the federal government enacted an unprecedented package of social safety net measures, including broad-based cash transfers in
the form of expanded unemployment insurance (UI), a series of economic impact payments (EIPs), and the expanded Child Tax Credit (CTC). It is well known that these measures— especially the expanded CTC—were crucial in driving child poverty to an all-time low of 5.2% in 2021 according to the Supplemental Poverty Measure (SPM), close to a 60% drop
from 2019. Beyond reducing child poverty, however, these cash-based safety net measures—along with other COVID-era policies—extended aid well up the economic ladder. Indeed, the full amount of the expanded Child Tax Credit was available to single parents making up to $75,000 and two-parent families with incomes as high as $150,000. This means that much of the program’s impact on economic well-being was realized by families with incomes well above the poverty line. This short research brief examines changes over time in two additional measures of child economic well-being that serve as complements to the child poverty rate: 1) the proportion of children with family incomes below 200% of poverty; and 2) the proportion of families reporting that they cannot cover a $400 emergency expense in cash or equivalent.

Many scholars and policymakers alike have argued that the poverty threshold is too low to capture the full extent of economic hardship faced by families; rather, an income of twice the poverty line may be a more appropriate threshold for understanding what a household needs. Take housing costs, for instance. In 2023, the average Supplemental Poverty Measure threshold for a two-adult, two-child family was $37,482, while median annual rent for a three-bedroom house nationwide was $27,375 or 73% of the SPM threshold. A family earning twice (200%) the SPM poverty threshold would have an annual income of $74,963, of which the median rent would consume just over one-third, which approaches what the average U.S. household spends on housing. Thus, it is no surprise that many families with incomes above poverty but below twice the poverty line still struggle to pay for housing, food, and other essential expenses. Most public assistance programs—such as the Supplemental Nutrition Assistance Program (SNAP) and Medicaid—implicitly recognize this by extending eligibility well above the poverty line. In fact, every state extends eligibility for Medicaid or the Children’s Health Insurance Program (CHIP) above 200% of poverty. This report uses 200% of the child SPM rate as its broader barometer of income adequacy. Data for this report are drawn from official analysis presented annually by the U.S. Census Bureau using the Current Population Survey, Annual Social and Economic Supplements. The analysis presents the proportion of children with family incomes below 200% (twice) the poverty line in the years before and after the COVID pandemic.

While doubling the poverty line offers a fuller picture of households experiencing economic hardship, Shaefer and Rivera and later Edin and Shaefer  both argue that income-based measures of economic well-being should be complemented with other alternative metrics. Income-based measures face well-known limitations including the accuracy of self-reports, and what components of income and consumption should be included in a poverty measure remains the subject of vigorous debate. Thus, related measures collected through different means can serve as a check against these limitations. Do these other metrics tell similar stories about the trends in and levels of hardship? This report also draws on one well-known metric of financial well- being reported by the Federal Reserve Board in its “Report on the Economic Well-Being of U.S. Households.” Based on a nationally representative sample, it tracks the share of U.S. adults who say they can cover a $400 emergency expense using cash or its equivalent. This report tracks this metric for parents with children.

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