Poverty rose to 11.7% in March, marking a record high for poverty rates in the U.S. since the start of the pandemic, according to research conducted by the University of Chicago and Notre Dame.
As the pandemic continues to reshape the workforce, individuals face financial strain like never before. Currently, there are nearly 10 million people who are officially unemployed. Without additional aid packages, many will continue to suffer from the economic impacts of COVID-19, James Sullivan, professor of economics at Notre Dame, said.
In 2012, Sullivan co-founded the Wilson Sheehan Lab for Economic Opportunities with fellow Notre Dame economics professor William Evans. The joint research center works to identify effective and replicable solutions to reduce poverty in America.
Official poverty estimates typically come out once a year in September for the previous calendar year. Knowing policymakers would need the data sooner than that in order to effectively respond, Sullivan and Evans constructed a dashboard that measures poverty in the U.S. regularly.
To calculate near-real-time estimates of poverty, Sullivan utilizes data from the monthly Current Population Survey (CPS). CPS is a nationally representative survey of about 60,000 households each month. It includes a question about family income asked to a quarter of the sample, which provides the data necessary to estimate poverty.
“We are disseminating our results every month through the dashboard and making policymakers and policy advocates aware of these results so that they can inform policy decisions,” Sullivan said.
In addition to having constant online access, those on the frontlines of COVID-19 policymaking receive the data in a monthly report.
With the data, policymakers have been able to craft relief packages for the American people. As outlined in the “Real-time Poverty Estimates through March 2021” report, the government has responded to the rising employment rates shown in Sullivan’s data by passing COVID-19 relief bills.
At the beginning of the pandemic, the federal government passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act), which included a one-time stimulus payment to households and expanded unemployment insurance benefits.
Sullivan attested to the positive impact this had on poverty, even amid rising unemployment rates.
“In May of 2020, even though there was a sharp decline in earnings, poverty fell because of the benefits of the CARES Act, both in terms of the stimulus payments and additional unemployment insurance benefits,” Sullivan said.
When the unemployment insurance benefits expired in June, Sullivan said poverty began to rise again and continued to do so through November.
In response to growing poverty rates, the federal government issued another relief package in December, which offered smaller stimulus payments and partially extended some other benefits. Similarly to the May relief package, the December package only offered temporary relief, Sullivan said.
Poverty estimates for January and February showed a declining poverty rate. Contrary to this, March data showed a rise in poverty by 0.5%.
The latest relief package — the American Rescue Plan — was passed in March. It includes more generous stimulus payments of up to $1,400 per person, extends the $300 Pandemic Unemployment Compensation payments to September and provides a significant increase in child tax credit. The impact this has had on rising poverty rates will be released at the end of the month.
Sullivan noted that although these relief plans only temporarily lessen the economic strain many face because of the pandemic, they are necessary for solving poverty.
“They provide much-needed temporary relief,” he said. “When the government issued new benefits to address the pandemic, we saw poverty fall.”
He believes individual aid, in addition to assisting small businesses and incentivizing work, will help people adjust to the changes happening in the workforce.
“The lingering effects of the pandemic will make life challenging, seeing that many of the jobs that were eliminated by the pandemic were low-skilled worker jobs,” Sullivan said.
When the economy expands, Sullivan said, he sees new jobs surfacing. With relief packages, he said he believes people who are far from the labor market can focus on developing the new skills necessary for the work available rather than worrying about immediate payments.
Sullivan noted that for the economy to respond, the pandemic must be dealt with.
“First and foremost, we need to address the concern about the lingering pandemic because that’s the main barrier for preventing the economy from bouncing back,” Sullivan said.
Sullivan said he believes the Rescue Act serves that purpose. Drawing on data patterns, he said he feels optimistic about the future.
“It’s very likely America will see a decline in poverty over the next several months as the impact of the Rescue Act is felt on household budgets,” he added.
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