Columbia Study Shows COVID-19 Relief Holding Poverty Rates Down

A June 21, 2020 study published by the Center on Poverty & Social Policy of Columbia University indicates that the Coronavirus Aid, Relief, and Economic Security Act (PL 116-136), CARES Act (COVID-19 package number 3) has been successful in reducing the increase in the poverty rate. In the absence of the CARES Act, the study projects that poverty rates would rise to 16.3 percent instead of 12.7 percent (pre-COVID-19 it was 12.5 percent). The study also concludes that key components of the CARES Act are scheduled to expire after July 2020, leaving many families with little to no income support in the second half of the year. Third, many families, such as those with undocumented immigrants, are explicitly left out of the CARES Act.

While the Senate leadership continues to stall on consideration of what would be a fifth COVID-19 package, the authors of the study say, “We conclude that if high unemployment rates persist beyond July 2020, additional income support will be needed to prevent subsequent increases in economic insecurity and hardship.”

The general points made by the study include:

  • The CARES Act’s Recovery Rebates and expansions to unemployment benefits are projected to provide up to $500 billion in income transfers in 2020, more than the total amount of all spending on non-retirement income transfers in 2019.
  • The CARES Act transfers are short-term and temporary, leaving many families with little or no income support after July 2020.
  • The CARES Act has the potential to return annual poverty rates to pre-crisis levels, but only if an adequate share of families can actually access the CARES Act benefits.
  • The CARES Act’s effect on annual poverty rates likely understates the immediate hardship that many families are experiencing, especially those waiting to receive their CARES Act benefits.
  • If high unemployment rates persist beyond July 2020, additional income support will likely be needed to prevent subsequent increases in poverty and hardship.
  • Unemployment rates are particularly high for Hispanic and Black workers, suggesting that an end to the CARES Act’s income support after July 2020 may exacerbate racial and ethnic differences in poverty

According to the study, if the income supports and transfers had been enacted the poverty rates for Hispanic populations would be 27 percent instead of 20 percent, for black populations it would have been 25 percent instead of 20 percent, for Asian populations it would have been 19 percent instead of 15 percent and for white populations 11 percent instead of 9 percent.

The CARES legislation included several key direct benefits to adults and families: one-time payments of $1,200 per adult and $500 per child; it extended and broadened unemployment insurance to workers who don’t qualify under state benefits and laws including many low-income workers and self-employed such as uber drivers and people who work for themselves such as hairdressers, and it added $600 to weekly unemployment checks through July — a bonus of nearly $11,000 on top of regular payments. The latter benefit is being hotly disputed in the US Senate, with some claiming it discourages people from returning to work while supports point out that some states only provide a maximum monthly benefit of around $1000.

In regard to relief and poverty, what is often forgotten that in the recession of 2008-09 and now in this recession, there are billions of dollars in federal programs “safety-nets” that did not exist in 1929 when an estimated 25 percent of the country was unemployed. The programs that exist today that did not exist in the first four years of the depression include the following: Social Security, Supplemental Security Income, Medicare, Medicaid, unemployment compensation, food stamps/SNAP, other federal nutrition programs including school lunches, cash welfare, federal aid to education including K-12 and Higher Education and housing subsidies.

 

About the Author:

John Sciamanna is CWLA's Vice President of Public Policy.

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