Even in normal times, public safety net spending and social insurance programs are effective policy tools to reduce poverty and alleviate the economic distress of families. Census data released today also show that these programs kept tens of millions of people from severe economic deprivation during the first half of the ongoing COVID-19 pandemic. Remarkably, poverty rates were significantly lower last year than they were in 2019, after accounting for the scale of public assistance provided in 2020.
The poverty rate reduction highlights how much poverty the nation and its policymakers tolerate is a choice. It should not have taken a pandemic to make us realize this.
Last year, Economic Impact Payments (stimulus checks) and unemployment insurance (UI) benefits played larger than usual roles in reducing poverty. The Census Supplemental Poverty Measure (SPM) data show that the first two Economic Impact Payments and UI benefits reduced poverty by 11.7 and 5.5 million people, respectively (see Figure A).
Social Security remained the largest anti-poverty program in 2020. Primarily reducing poverty among families with older individuals, Social Security reduced poverty by 26.5 million people. Without Supplemental Nutrition assistance and school lunch benefits, 3.2 million more people would be in poverty, many of them children.
Historically the UI system has played a limited role in poverty reduction, with uneven state-based implementation, restrictive eligibility requirements, and relatively stingy benefits blunting its effectiveness as a poverty-reducer. But as job loss accelerated last year, Congress temporarily strengthened the UI system in March 2020 and expanded eligibility to previously excluded workers—like independent contractors and those with low incomes—and provided an additional $600 weekly unemployment benefit for three months.
As a result of the increased federal funding and extensions, 10 times as many people were kept out of poverty by UI in 2020 than was the case in 2019.
The Economic Impact Payments (EIP) reduced poverty by an even larger amount than UI. This is largely a function of the fact that the EIP program simply spent more money—about 44% more over the relevant period, according to Bureau of Economic Analysis data. Had Congress not let the $600 UI payments lapse in late July 2020, the UI program would have generated even larger reductions in poverty than it did.
While Congress eventually extended pandemic UI programs in January 2021, these programs have been terminated entirely, first in June 2021 by about two dozen states, and then at the beginning of this month by the rest of the nation.
Existing evidence shows that these programs substantially increased incomes and consumer spending, with little negative cost to employment opportunities. Today’s Census data underscore that the pandemic UI programs were essential to cushioning the blow of the pandemic in 2020, and that social assistance programs, when well-funded, can dramatically reduce hardship. Congress should reinstate the extensions and reform UI systems immediately, as the spread of COVID-19 continues to sharply limit growth and job opportunities for millions of workers.