Poverty Rate Swings With Pandemic Aid, New Measure Shows

Off the Charts: The Visual Says It All

Worried Family With Financial Documents
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JackF

Government aid triggered by the pandemic has clearly helped to keep people out of poverty, a new monthly measure of poverty shows.

In the last year, the poverty rate has consistently declined following the distribution of government relief funds and then ticked back up when those funds started to run out, according to a study by researchers from the University of Notre Dame, the University of Chicago, and Zhejiang University in China released last week. 

The chart below shows that direct relationship. It’s based on the researchers’ new measure of poverty, which relies on U.S. Census Bureau data to track it in nearly real-time.  

Since the outbreak of COVID-19 last March, the federal government has stepped in multiple times to help households hurt by the economic downturn, but it’s been in fits and starts.

The dips in the poverty rate in the spring of 2020 and winter of 2021 can be entirely attributed to specific rounds of stimulus checks issued by the federal government, as well as the temporary expansion of unemployment insurance eligibility and the addition of a federal supplement to state-administered unemployment benefits, the researchers said. Without the aid, the poverty rate would have risen instead of declining, they said.

Take the second half of 2020, for example. As parts of the first major federal relief package, the CARES Act, expired—including a $600-per-week federal unemployment supplement—the poverty rate rose 2 percentage points from June to December, the study found. That amounts to an additional 6.7 million people living in poverty.

The effect of a second stimulus package, passed in late December 2020, waned in March, causing another increase in the poverty rate. The March numbers were collected just days after President Joe Biden signed the American Rescue Plan into law, and do not include the effect of the programs in that latest relief package.

The researchers said they expect this rise-and-fall trend to continue as long as the federal government continues to renew temporary programs instead of making them permanent or letting them expire.