The coronavirus pandemic prompted an unprecedented decline in economic activity, with millions of job losses hitting low-income households particularly hard. But during those challenging times, over 6 million Americans have been lifted out of poverty, thanks to increased government support.
The poverty rate declined by 2.6 percentage points from 10.9% in January and February before the pandemic started to 8.3% in April and May when millions of jobs were already lost due to the outbreak, according to a new paper by the Becker Friedman Institute at the University of Chicago. In the last 20 years, there’s been only one decline larger than 1 percentage point.
“It’s enormous for a month or two,” said Bruce Meyer, professor at the University of Chicago Harris School of Public Policy and co-author of the paper.
The decrease in poverty is driven by the government’s response to the pandemic and the distribution of stimulus checks and additional unemployment benefits under the CARES Act.
“These are unprecedented transfers from the government to household income,” said James Sullivan, professor at the University of Notre Dame and co-author of the paper. “Nearly $260 billion to households in the U.S. and the unemployment insurance program provided more than $140 billion in April and May.”
In addition to the declining poverty level, personal income was also up more than 10% in April and some Americans are getting closer to earning a living wage than before, but the supports that made this happen — mainly stimulus checks and unemployment benefits — were one-time or set to expire soon. That means all those gains may be lost.
“That's a sizable decline in poverty, but there's a lot of questions around whether it will persist,” Sullivan said. “More than all of it is driven by the government response, some of that which was temporary in the form of one-time payments, and the expansion of weekly unemployment insurance benefits expires at the end of July.”