8 Million Have Slipped Into Poverty Since May as Federal Aid Has Dried Up

By: Jason DeParle

Two new studies and Census numbers show the effect of the emergency $2 trillion package known as the Cares Act and what happened when the money ran out

WASHINGTON — After an ambitious expansion of the safety netin the spring saved millions of people from poverty, the aid is now largely exhausted and poverty has returned to levels higher than before the coronavirus crisis, two new studies have found.

The number of poor people has grown by eight million since May, according to researchers at Columbia University, after falling by four million at the pandemic’s start as a result of a $2 trillion emergency package known as the Cares Act.

Using a different definition of poverty, researchers from the University of Chicago and Notre Dame found that poverty has grown by six million people in the past three months, with circumstances worsening most for Black people and children.

“These numbers are very concerning,” said Bruce D. Meyer, an economist at the University of Chicago and an author of the study. “They tell us people are having a lot more trouble paying their bills, paying their rent, putting food on the table.”

Underscoring those concerns, the Labor Department reported on Thursday that about 886,000 people filed new claims for unemployment benefits last week, an increase of nearly 77,000, or 9.5 percent, from the previous week. Adjusted for seasonal variations, the total was 898,000.

The recent rise in poverty has occurred despite an improving job market since May, an indication that the economy had been rebounding too slowly to offset the lost benefits. And now the economy is showing new signs of deceleration, amid layoffs, a surge in coronavirus cases and deadlocked talks in Washington over new stimulus.

The Democratic House has twice passed multitrillion-dollar packages to provide more help and to stimulate the economy, but members of a divided Republican Senate, questioning the cost and necessity, have proposed smaller plans.

President Trump has alternately demanded that Congress “go big”before the elections and canceled negotiations. On Thursday, he signaled he was ready to increase the size of previous White House offers, to accommodate Democrats, only to be rebuffed hours later by Senator Mitch McConnell, Republican of Kentucky and the majority leader.

The Cares Act included one-time payments for most households — $1,200 per adult and $500 per child — and a huge expansion of unemployment insurance.

That expansion at least doubled the share of jobless workers who receive checks, the researchers estimated, by including gig workers and the self-employed through December. In addition, it added $600 to weekly aid through July — nearly tripling the average benefit. For about two-thirds of the beneficiaries, the bolstered checks more than replaced their lost wages.

At its peak in May, the aid kept more than 18 million people from poverty, the Columbia researchers found. But by September, that number had fallen to about four million.

“The Cares Act was unusually successful, but now it’s gone, and a lot more people are poor,” said Zachary Parolin, an author of the Columbia analysis.

While the Columbia model showed an improvement in September, the Chicago and Notre Dame analysts found poverty continued to grow.

Among those experiencing new hardships is Kristin Jeffcoat, 24, who is raising three children in Camptonville, Calif., a hamlet about 80 miles north of Sacramento. When schools closed last spring, Ms. Jeffcoat, an Instacart shopper, stayed home to watch them. Then her husband got laid off from landscaping work.

The expanded safety net initially caught them: Together, they received more than $1,500 a week in jobless benefits, which exceeded their lost wages. They also received a $3,900 stimulus check, which they used to prepay three months of rent. But since the unemployment bonus ended in July, their cash income has fallen nearly 80 percent.

Now living on $350 a week plus food stamps, Ms. Jeffcoat and her husband have gone without electricity because they cannot afford generator fuel (their house is off the power grid) and have spent weeks without propane for cooking and hot showers. “We stick with cold meals — cereals,” she said.

To feed the children, Ms. Jeffcoat said she sometimes skips meals, especially at the end of the month when the food stamps have run out. Her husband sold his tools to buy diapers, and Ms. Jeffcoat tried to sell her eggs to a fertility clinic, but she did not medically qualify. Worse than the physical hardships is the worry.

“I’ve definitely found myself feeling a little more anxious — snappier with the children,” Ms. Jeffcoat said.

Income volatility is especially hard on low-income families, who lack the savings or credit to keep essential bills paid. It acts as a kind of invisible tax, measured in units as varied as late fees, toxic stress and worse school outcomes for children. “The lack of predictability has all kinds of negative consequences,” said Bradley L. Hardy, an economist at American University, who notes the recent benefit fluctuations amplify the economic gyrations.

The aid expansion did not reach everyone. About a third of the unemployed still do not receive unemployment checks, the Columbia analysts estimated. Some jobless people are unaware they can apply, and many encounter red tape. Undocumented workers are disqualified from unemployment aid, and no one in their households can get stimulus checks, including spouses and millions of American children.

Among individuals eligible for stimulus checks, about 30 percent failed to receive them, the Columbia researchers estimate. While most families received them automatically, those too poor to have filed tax returns had to apply.

Still, admirers of the Cares Act say its success in reducing poverty, amid an economic collapse, shows the benefits of a strong safety net. “It wasn’t perfect, but hands down it’s the most successful thing we’ve ever done in negating hardship,” said H. Luke Shaefer, a poverty researcher at the University of Michigan.

Members of both research groups said the rising poverty showed a need for a new round of help. “It’s really important that we reinstate some of the lost benefits,” said Mr. Meyer, who is also affiliated with the conservative American Enterprise Institute.

His conclusion that poverty is rising may draw special attention because he is a critic of government poverty statistics, saying they exaggerate the number of poor people by failing to fully measure the resources that lower-income households receive.

But some opponents of further assistance argue it has discouraged people from working.

“There’s just lots of opportunity that’s not being accessed — we’ve got to get people back to work,” said Jason Turner, who runs the Secretaries’ Innovation Group, which advises conservative state officials on aid policies. “I’m not as alarmed about poverty as I am about unemployment. Poverty is an arbitrary income threshold, and people who dip below it, they make adjustments. If you’re not working at all, that’s a huge deal. Physical and mental health declines, substance abuse goes up.”

Given the magnitude of the crisis, the increase in poverty since January — about 8 percent by the Columbia count — was a “modest amount,” Mr. Turner said.

By the government’s fullest measure, a family of four in a typical city is considered poor if its annual income falls below $28,170.

The crisis is hitting minorities especially hard, preserving or even deepening the large poverty gaps that predated the pandemic. The analysts at Chicago and Notre Dame (including James X. Sullivan and Jeehoon Han) found poverty among Black people rising at an especially fast pace, at a time of widespread protests over racial inequality.

Black people and Latinos are more than twice as likely as white people to be poor, the new data shows. Both minority groups disproportionately work in industries hard-hit by the recession and may face barriers to aid. Black people disproportionately live in Southern states with low benefits, and some Latinos are disqualified because they lack legal status.

Both studies also found child poverty rising at a rapid rate, with an additional 2.5 million children falling below the poverty line since May. Research shows that even short stays in poverty can cause children lasting harm.

Jenny Santiago, a single mother in Pontiac, Mich., fears her household’s worsening finances creates new peril for her four children, ages 8 to 13. A driver for takeout services, Ms. Santiago quit work when schools closed in March to to watch her children. The stimulus check and $600 unemployment bonus provided “a nice chunk” of help, she said, “but it didn’t last forever.”

Now that her income has dwindled, she trims her meals to feed the children, and her landlord is trying to evict her. But she cannot work without child care, and her children feel her anxiety. “It’s scary,” Ms. Santiago said. “I’ve got to keep a roof over their head. They know when I’m stressed out.”

Both studies showed poverty started to rise before the unemployment bonus expired in July, suggesting the stimulus checks, which arrived earlier, played an important role.

Optimists might note that the Columbia study showed poverty fell in September. That could be a sign that hardship is easing. But Mr. Parolin, the Columbia researcher, said that he “wouldn’t make too much of a one-month trend” when levels remain elevated. And the Chicago-Notre Dame study found poverty in September continued to grow.

Officially, the government measures poverty on an annual basis and publishes its estimates in arrears — this year’s rate will not be released until next fall. To provide policymakers more timely information, both teams use monthly census data to project more up-to-date trends.

The Chicago-Notre Dame approach counts the most recent 12 months of income, preserving the annualized time frame. The Columbia researchers consider each month’s income separately, which makes it more timely but ignores earlier paychecks and aid. (The researchers include Megan A. Curran, Jordan Matsudaira, Jane Waldfogel and Christopher Wimer.)

Still, the stories they tell are consistent. “The Cares Act was very successful,” Mr. Wimer said. “But one of its shortcomings was its temporary nature.”

 

 

 

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