Poverty soared to a pandemic high last month

Researchers at the University of Chicago Harris School of Public Policy and the University of Notre Dame Department of Economics are using monthly Census data to capture a nearly real-time snapshot of American poverty. Last month, even as the unemployment rate fell and more states relaxed restrictions on business operations, the poverty rate hit a pandemic high of 11.7 percent — a full percentage point greater than it was in early 2020.

For some of the most marginalized populations, the rate of poverty in March was even higher. Black poverty had retreated from the 23.3 percent high it touched last August but, at 21.2 percent, remained close to double that of the overall rate. Childhood poverty soared to a rate of 17.4 percent, and was high for less-educated people, as well, rising to 22.2 percent among those with only a high school education or less.

In both January and February of 2020, the poverty rate held steady at 10.7 percent — although even those metrics masked the challenges faced by some populations. Black poverty, for instance, was 20.7 percent in February 2020, compared to a rate of 8.9 percent for whites. The poverty rate for people without any college education was also elevated, at 19.6 percent in February 2020.

Experts say the monthly research illustrates just how instrumental Congressional fiscal aid such as the CARES Act and subsequent stimulus programs at keeping families out of poverty have been — and offers a glimpse of what could happen once those programs wind down if employment has not rebounded significantly.

“It’s astonishing that we’re seeing a high now. It does underscore how vulnerable so many people are that we still have not recovered enough that once the government aid starts tapering down… you can’t just cut off this aid overnight before the jobs come back,” said Andrew Stettner, senior fellow at the Century Foundation. “You’d hope by now things would have recovered,” he added.

Significantly, the researchers found that the poverty rate actually dropped in the early months of the pandemic, hitting a trough of 9.1 percent in May. James Sullivan, an economics professor and director of the Lab for Economic Opportunities at the University of Notre Dame and one of the research authors, said this was almost certainly a function of the combination of $1,200 stimulus payments that were distributed to most Americans, expanded unemployment benefits including benefits for gig and self-employed workers, and an extra $600 weekly benefit on top of existing state benefits.

“I feel like the most important takeaway from the work we’ve been doing since the start of the pandemic is the clear relationship between poverty and government relief efforts,” he said. “At the time, people were a little bit surprised, but then you look at the magnitude of the CARES Act, and it really makes sense that poverty would fall in the short run.”

The pandemic wreaked havoc on the finances of millions of households, but that pain was not spread evenly. Many people who were able to make the transition to working from home kept their jobs — although some did have their pay or hours reduced. But for people who worked in shuttered hotels, restaurants and malls, there were no alternatives.

“The economic impacts of the pandemic have been incredibly disparate,” Sullivan said. More recently, economists have noted the K-shaped recovery that has bifurcated Americans into haves and have-nots in the ensuing months.

The project’s authors note that while the unemployment rate has improved markedly since last April, weekly jobless claims filed still are being filed at a rate five times higher than before the pandemic. Sullivan suggested the April snapshot might show a brighter picture, though, since more families will have received financial assistance from the $1.9 trillion American Rescue Plan signed into law last month. “The latest relief package is going to provide significant additional resources to households, but we haven’t seen that in the data yet,” he said.

Stettner said those dollars would benefit the broader economy, not just the recipients. “Overall, the economy is doing very well, given the pandemic. That has a lot of do with the fact that we’ve supported people at the bottom. A lot of the consumer spending in our economy is by low- and middle-income workers. When they don’t have money, the economy suffers,” he said.

As a result, he added, it is important for policymakers to keep their foot on the gas and commit to fiscal support until the labor market recovery picks up steam. “In many sectors of the economy, it’s not going to open overnight,” Stettner said. “It’s going to take time for that activity to ramp back up.”