Poverty actually fell in early to mid-2020, as the pandemic took hold, due to an unprecedented expansion of government safety net programs. But it has since grown and surpassed its early 2020 level, and is poised to increase more if the economic situation remains dire.
Those are the major findings from projections made by researchers at the Center on Poverty and Social Policy (CPSP) at Columbia University, who have been developing methods for monthly estimates of poverty during the Covid-19 pandemic. The researchers — Zach Parolin, Chris Wimer, Jane Waldfogel, Jordan Matsudaira, and Megan Curran — use a metric known as the “supplemental poverty measure,” designed as a more consistent and reliable measure of hardship than the official poverty measure used by US government programs. Their metric is hardly perfect — critics argue it “defines poverty down” by setting too low an income threshold — but it’s useful for tracking variations like those experienced during the Covid-19 crisis.
According to their data, 15.5 percent of Americans, or 50.3 million people, were living in poverty in January 2020, before the coronavirus crisis began in earnest. In April, after relief measures began, the rate was down to 13.9 percent.
The crisis continued, but many relief measures did not. The $1,200 “economic impact payments” (a.k.a. stimulus checks) were a one-off. The $600-per-week boost to unemployment insurance expired at the end of July. And poverty began creeping back up again, reaching 17.3 percent in August, and 16.7 percent, or about 54.2 million people, in September.
In other words, about 4 million more people were in poverty by September than were at the beginning of 2020. That’s a quite large degradation in living standards.
Looking ahead to January 2021 requires making some assumptions about unemployment. The rate as of October was 6.9 percent, a swift improvement from the peak of 14.7 percent in April. But it’s still nearly double what it was in February before the crisis.
The Columbia researchers’ findings confirm that the January 2021 poverty situation will depend heavily on unemployment. They find that even if unemployment falls to 5 percent, which would be a big improvement, poverty will rise modestly from 16.7 percent in September to 17 percent in January, putting another 1 million or so people in poverty for a total of 55.2 million.
If, on the other hand, unemployment remains elevated, the situation gets substantially worse. If it ticks up to 7.5 percent, then poverty will reach 18.1 percent, or 58.8 million people. If the situation deteriorates substantially and unemployment rises to 10 percent again, then poverty will rise to 19.1 percent of Americans — 62.1 million.
The upshot is this: Depending on the scale of the broader economic recovery, between 4.9 million and 11.8 million more people will be living in poverty in January 2021 than were in January 2020.
This is a large increase even compared to the Great Recession. The same Columbia research group estimates that from 2007 to 2011, poverty measured the same way rose from 14.4 percent to 16.1 percent of the population, a 1.7-point increase. The best-case scenario of 5 percent unemployment in January 2021, by comparison, registers as a 1.5-point increase in poverty, similar in scale to the Great Recession. If we don’t get down to 5 percent unemployment, the effects could be worse than the Great Recession.
Signs of a large decline in living standards for low-income Americans
The Columbia team is not the only group of researchers attempting to track living standards for Americans in poverty on a monthly basis during this crisis. Jeehoon Han of Zhejiang University, Bruce Meyer of the University of Chicago, and James X. Sullivan at the University of Notre Dame have their own set of real-time measures, and while they do not calculate projections for January 2021, they tell the same story as the Columbia researchers about what happened from January to October 2020.
The poverty rate, as they measure it, fell from 10.9 percent in January/February to 9.4 percent in April/May/June (they average months in an attempt to minimize error). But it then ticked up dramatically, from 9.4 percent to 11.3 percent in September and October. “Nearly 7 million have been added to the ranks of the poor since May,” the researchers write in their most recent release. “Poverty appears to have risen in October even though the unemployment rate fell by more than a percentage point.”
That disconnect is partially a temporary result of the expiration of aid programs — but if it holds, then poverty could rise even more with falling unemployment than the Columbia numbers suggest.
One thing to keep in mind when interpreting these two sets of numbers is that the Columbia team defines people and households as “in poverty” if they fall below a certain income threshold (adjusted for cost of living in their area and a few other factors) during a particular month. That has advantages, particularly during a rapidly evolving crisis like this one, but also disadvantages: It only counts tax credits, for instance, as income for the month when a person’s tax refund is delivered. So if a low-income worker got a large earned income tax credit (EITC) in March, that counts as a several-thousand-dollar windfall for just that month — which helps explain why the Columbia measure sees poverty falling in March, even before Covid-19 relief measures were implemented.
The Zhejiang/Chicago/Notre Dame team, by contrast, uses an annual reference period: It is trying to estimate how many people fell below a certain income level in the past 12 months. That gets around problems like the EITC but might make income fluctuations look smaller than they feel: If you lost all your pay in April, that would only show up as an 8 percent fall in your annual income, measured from the previous April. On a monthly basis, though, your income fell 100 percent.
Another indication of an increase in that kind of short-run need is the nationwide surge in demand for supplies from food banks. A report from Hunger Free America found that in New York City, food pantries and soup kitchens fed 65.1 percent more people in 2020 than in 2019; that’s compared to a 10 percent increase in people served the year before. The Greater Boston Food Bank told the Boston Globe that it went from distributing 1 million pounds of food per week to 415,000 people pre-pandemic to 2.5 million pounds per week to over 660,000 people.
The St. Louis Area Foodbank in Missouri reports that it went from distributing 3.1 million meals a month pre-pandemic to 5 million meals a month now. In Grand Rapids, the South Michigan Food Bank reported distributing more food in October than it had in any prior month in its 38-year history, covering both the early 1980s recession and the Great Recession. Underlying these trends is an increase in food insecurity, which is closely linked to income poverty.
The next stimulus needs to address the increase in poverty
One of the first tasks the Biden administration will face in January is crafting a stimulus package that will pick up where the package that expired at the end of July left off. The expiration of the $600-a-week bonus unemployment benefit appears to have substantially increased need and poverty at the low end, and reviving a bonus benefit and providing other income support policies will be critical for avoiding further increases in poverty and returning the poverty rate to where it was in January 2020, if not lower.
President-elect Biden has outlined what his preferred stimulus package would look like in considerable detail. It includes extending the $600-per-week unemployment insurance bonus; extensive aid to state, local, and tribal governments; and a $250-per-child monthly allowance for families, boosted to $300 per month per child for kids under 6.
But congressional Democrats have struggled to get a deal matching these parameters through the Republican-controlled Senate, or even a more limited one with, say, $400 per week in bonus UI payments. Republican leader Mitch McConnell has insisted on a lower-cost package that includes civil immunity for businesses that put people at risk of Covid-19 infection. McConnell is likely to hold that line if he controls the Senate under Biden; control of the Senate will be determined in two Georgia runoff elections on January 5.
The main challenge for policymakers interested in poverty alleviation, then, will be convincing McConnell and his allies to support stimulus and income support at the level that’s needed to reverse the increase in poverty.
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