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Let Them Eat Cake - Poverty Continues To Rise

Poverty Rise
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EDITOR NOTE: Mainstream media taps not the colder faculties leaning toward calculated analysis but the more primal impulses of desire and self-preservation. In short, people want to be “fed” a certain way of viewing the world. And the “screen” has become as much a proxy for “truth,” as the absence beyond it, a dark screen of irrelevance. Like the famous McLuhan saying goes, “the medium is the message.” The problem, of course, is that any truth unseen can easily be erased by whatever appears on the screen. So, the truth, according to mainstream media, is that the market is at all-time-highs, the economy is recovering, and 2021 might bring double-digit returns. What’s unseen? Every week, nearly a million Americans join the ranks of the newly unemployed; and between June and November, 8 million more Americans shifted into poverty. Mainstream media’s job is to tell you what’s “palatable”; to give you what you crave. It’s like Marie-Antoinette, to whom the phrase “let them eat cake” was attributed. In the meantime, you starve--either from a lack of truth, or quite literally from a lack of real income and economic growth.

The coronavirus pandemic has taken a significant toll on the U.S. labor market. Since the start of the pandemic, more than 86 million claims for unemployment insurance have been filed. While UI claims fell sharply from April through July, weekly claims have remained high since then at more than 1 million claims each week, about 5 times the pre-pandemic rate. Currently, more than 10.7 million individuals are officially unemployed and millions of other former workers are still without jobs. Early in the pandemic, the federal government offered a relief package that included large, one-time stimulus payments to households and greatly expanded unemployment insurance benefits. But some of these benefits have expired, and others are set to expire this month, raising important questions about the long-term impact of the pandemic on poverty.

In a recent study, which is forthcoming in the Brookings Papers on Economic Activity, we developed a new poverty measure that provides near-real-time poverty estimates using U.S. Census Bureau data. These estimates, which can be produced with a lag of only a few weeks, provide immediate information on how the pandemic is affecting individuals and families. As a result, the estimates should guide government policies and programs that help prevent people from slipping into poverty during sharp downturns in the economy. This report summarizes the results from the most recent update to our study, including poverty rates through November 2020. These monthly updates are also available through our Poverty Measurement Dashboard at http://povertymeasurement.org/covid-19-poverty-dashboard/.

Our initial study provided estimates through June 2020. In Table 1, we report these estimates as well as updated results through November 2020. Our initial results showed that poverty declined in the first few months after the start of the pandemic. The poverty rate fell by 1.5 percentage points from 10.9 percent in the months leading up to the COVID-19 pandemic (January and February) to 9.4 percent in the three months at the start of the pandemic (April, May, and June). We also showed that poverty declined across a range of demographic groups and geographies, with some of the most noticeable declines evident for people with low levels of education and for those who fall into the “other race” (neither white nor Black) category.

Poverty has risen sharply, however, in recent months as some of the benefits that were part of the government relief package have expired. Poverty rose by 2.4 percentage points from 9.3 percent in June to 11.7 percent in November, adding 7.8 million to the ranks of the poor. Poverty has risen each month since June, even though the unemployment rate has fallen by 40 percent (from 11.1 percent to 6.7 percent) over this period. This disconnect between poverty and unemployment is not surprising given that some government benefits have expired, unemployment insurance benefits are typically only about half of pre-job loss earnings, and five million people have left the labor force in the past year and therefore are not counted as unemployed. Despite the decline early in the pandemic, poverty is now higher than it was at the start of the year.

The increase in poverty in recent months was more noticeable for blacks, children, and those with a high school education or less. For blacks, poverty has risen by 3.1 percentage points since June. Poverty has also risen noticeably for those with a high school education or less, from 17.0 percent in June to 22.1 percent in November. The estimates also suggest that poverty rose more in states with less effective unemployment insurance systems. The recent overall rise raises concerns about possible future increases in poverty given that Pandemic Unemployment Compensation, the additional $600 paid weekly to unemployment insurance recipients, was discontinued at the end of July, and Pandemic Unemployment Assistance, for those usually not eligible for regular unemployment insurance, will expire in December.

Interestingly, the data indicate that the vast majority of the unemployed received unemployment insurance by June, though this was less true early on in the pandemic. Receipt of the benefits was uneven across the states, however, with some not reaching a large share of their out-of-work residents.

In our initial study, we also showed that the entire decline in poverty through June can be accounted for by the one-time stimulus checks the federal government issued, predominantly in April and May, and the expansion of unemployment insurance eligibility and benefits. In fact, in absence of these programs, poverty would have risen sharply. The one-time payments provided up to $1,200 to individuals and $2,400 to married couples without dependents, with the maximum amount going to individuals with income under $75,000, and married couples with income under $150,000. In addition, unemployment insurance benefits were initially increased by $600 per week and eligibility for unemployment insurance was broadened to include the selfemployed, those seeking part-time employment, and others who otherwise would not be eligible.

To calculate near-real-time estimates of poverty, we use data from the monthly Current Population Survey (CPS), a nationally representative survey of about 60,000 households each month — the same survey that is used to calculate official monthly unemployment statistics. This survey includes a question about family income that is asked of a quarter of the sample and provides the data necessary to estimate poverty. We show that, historically, the real-time poverty estimate from the monthly CPS has been a good predictor of changes in the official poverty rate.

See our study for more details.

Originally posted on Harris Public Policy

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