Poverty actually fell from early to mid-2020, when the pandemic took hold, due to an unprecedented expansion of government safety net programs. But it has since risen above its early 2020 level, and is set to rise further if the economic situation remains dire.
These are the main conclusions of the projections made by researchers at the Center on Poverty and Social Policy (CPSP) at Columbia University, who have developed methods for monthly estimation 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 measure of poverty,” designed as a more consistent and reliable measure of hardship than the official measure of hardship. poverty used by the US government. programs. Their metric is barely perfect – critics say he “sets poverty down” by setting an income threshold too low – but it is useful for following variations like those experienced during the Covid-19 crisis.
According to their data, 15.5% of Americans, or 50.3 million people, lived in poverty in January 2020, before the coronavirus crisis began in earnest. In April, after the start of relief measures, the rate fell to 13.9%.
The crisis continued, but not many relief measures. The $ 1,200 “economic impact payments” (or stimulus checks) were one-time. The $ 600-a-week UI boost expired at the end of July. And poverty has started to rise again, reaching 17.3% in August and 16.7%, or about 54.2 million people, in September.
In other words, about 4 million more people were in poverty in September compared to the start of 2020. That’s a pretty big deterioration in living standards.
For January 2021, we have to make assumptions about unemployment. The rate in October was 6.9 percent, a rapid improvement from the peak of 14.7 percent in April. But it is still almost double what it was in February before the crisis.
The results of Columbia researchers confirm that the poverty situation in January 2021 will depend heavily on unemployment. They find that even if unemployment falls to 5 percent, which would be a big improvement, poverty will increase slightly from 16.7 percent in September to 17 percent in January, putting another million people in poverty for one. total of 55.2 million.
If, on the other hand, unemployment remains high, the situation worsens considerably. If it reaches 7.5%, poverty will reach 18.1%, or 58.8 million people. If the situation deteriorates dramatically and unemployment rises to 10% again, poverty will hit 19.1% of Americans – 62.1 million.
The result is as follows: Depending on the size of the broader economic recovery, between 4.9 million and 11.8 million more people will live in poverty in January 2021 than in January 2020.
That’s a big increase, even from the Great Recession. The same Columbia research group estimates that from 2007 to 2011, poverty measured in the same way rose from 14.4% to 16.1% of the population, an increase of 1.7 points. The best-case scenario of 5% unemployment in January 2021, by comparison, comes as a 1.5 point increase in poverty, similar in magnitude to that of the Great Recession. If we don’t get down to 5% unemployment, the effects could be worse than the Great Recession.
Signs of a sharp drop in the standard of living of low-income Americans
The Columbia team is not the only group of researchers trying to track the standard of living of Americans living in poverty during this crisis on a monthly basis. Jeehoon Han from Zhejiang University, Bruce Meyer from the University of Chicago and James X. Sullivan from the University of Notre Dame have their own set of real-time measurements, and while they’re not calculating projections for January 2021, they tell the same story the Columbia researchers did 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 have on average months to try to minimize the error ). But it then rose dramatically, from 9.4% to 11.3% in September and October. “Nearly 7 million people have joined the ranks of the poor since May”, the researchers write in their most recent version. “Poverty appears to have increased in October even though the unemployment rate fell by more than a percentage point.”
This disconnect is in part the temporary result of the expiration of aid programs – but if it continues, poverty could increase even more with falling unemployment than Colombia’s figures suggest.
One thing to keep in mind when interpreting these two sets of numbers is that the Columbia team defines individuals and households as “in poverty” if they fall below a certain income threshold (adjusted for the cost of living in their area and a few other factors) in any given month. This has advantages, especially in a rapidly evolving crisis like this, but also disadvantages: it only counts tax credits, for example, as income for the month the tax refund d ‘a person is granted. So if a low-income worker got a large Working Income Tax Credit (CIE) in March, that counts as a windfall of several thousand dollars for that month alone. – which helps explain why the Columbia measure sees poverty decrease in March, even before the implementation of the Covid-19 relief measures.
The Zhejiang / Chicago / Notre Dame team, on the other hand, uses an annual benchmark period: they try to estimate how many people have fallen below a certain income level in the past 12 months. This works around issues like the EITC, but can make income fluctuations smaller than they think: if you lost your entire salary in April, that would only translate into an 8% drop in your annual income, measured against the previous April. On a monthly basis, however, your income has dropped by 100%.
Another indication of an increase in this type of short-term need is the nationwide surge in demand for food bank supplies. A report of America without hunger found that in New York City, pantries and soup kitchens fed 65.1% more people in 2020 than in 2019; this is compared to a 10% increase in the number of people served the previous year. the The Greater Boston Food Bank told the Boston Globe that it has gone from 1 million pounds of food per week at 415,000 people before the pandemic to 2.5 million pounds per week at more than 660,000 people.
St. Louis, Missouri Area Food Bank reports that it has gone from distributing 3.1 million meals per month before the pandemic to 5 million meals per month now. In Grand Rapids, the South Michigan Food Bank reported distributing more food in October than in previous months over its 38 year history, spanning both the recession of the early 1980s and the Great Recession. Behind these trends lies a increased food insecurity, which is closely linked to income poverty.
The next stimulus must face the increase in poverty
One of the first tasks the Biden administration will face in January is to create 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 unemployment premium appears to have dramatically increased need and poverty at the bottom of the ladder, and the reactivation of a premium benefit and other policies to support the labor market. income will be essential to prevent further increases in poverty and the return of the poverty rate to where it was in January 2020, if not lower.
President-elect Biden has describes what her favorite stimulus program would look like a considerable detail. It includes the extension of the unemployment insurance premium of $ 600 per week; significant assistance to state, local and tribal governments; and a monthly allowance of $ 250 per child for families, increased to $ 300 per month per child for children under 6.
But Congressional Democrats have struggled to secure a deal matching those parameters through the Republican-controlled Senate, or even a more limited one with, say, $ 400 a week in UI premiums. Republican Leader Mitch McConnell insisted on a lower cost package including civil immunity for companies that put people at risk of infection with Covid-19. McConnell will likely maintain this line if he controls the Senate under Biden; Senate control will be determined in two polls in Georgia on Jan.5.
The main challenge for policymakers interested in poverty reduction will therefore be to convince McConnell and his allies to support stimulus and income support at the level necessary to reverse the increase in poverty.
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